UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________________________________

FORM 10-Q

________________________________________________________



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~September~~March 3031, ~~2016~~2017



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER: 001-36465

________________________________________________________

Paragon Offshore plc

________________________________________________________



England and Wales	001-36465	98-1146017
(State or other jurisdiction of incorporation or organization)	(Commission file number)	(I.R.S. employer identification number)

3151 Briarpark Drive Suite 700, Houston, Texas 77042

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: + 1 832 783 4000

______________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company ¨ Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Number of shares outstanding and trading at ~~October~~April 3128, ~~2016~~2017: 8789,~~894~~011,~~997~~271

Table of Contents

PARAGON OFFSHORE plc

FORM 10-Q

For the Quarter Ended ~~September~~March 3031, ~~2016~~2017

TABLE OF CONTENTS

		PAGE
	GLOSSARY OF CERTAIN DEFINED TERMS	3
PART I	FINANCIAL INFORMATION	5
Item 1	Unaudited Condensed Consolidated Financial Statements
	Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015	5
	Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016	5
	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2016 and 2015	6
	Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2017 and 2016	6
	Unaudited Condensed Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015	7
	Unaudited Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016	7
	Unaudited Condensed Consolidated Statements of Changes in Equity (Deficit) for the nine months ended September 30, 2016 and 2015	8
	Unaudited Condensed Consolidated Statements of Changes in Equity (Deficit) for the three months ended March 31, 2017 and 2016	8
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015	9
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016	9
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3233
Item 3	Quantitative and Qualitative Disclosures About Market Risk	4847
Item 4	Controls and Procedures	4948
PART II	OTHER INFORMATION
Item 1	Legal Proceedings	5049
Item 1A	Risk Factors	5049
	SIGNATURES	5250
	Index to Exhibits	5351

Table of Contents

GLOSSARY OF CERTAIN DEFINED TERMS


Adjusted EBITDA	Net income (loss) before taxes plus interest expense, depreciation and amortization, losses on impairments, foreign currency losses and reorganization items, less gains on the sale of assets, interest income and foreign currency gains.


AOCL	Accumulated Other Comprehensive Loss


ASC	Accounting Standards Codification


ASU	Accounting Standards Update


Bankruptcy cases	The chapter 11 cases commenced by the Debtors filing voluntary petitions for relief under chapter 11 of the Bankruptcy Code in the Bankruptcy Court


Bankruptcy Code	United States Bankruptcy Code


Bankruptcy Court	United States Bankruptcy Court for the District of Delaware


Debt Facilities	Revolving Credit Facility, Term Loan Facility and Senior Notes, collectively

Debtors Paragon Offshore plc and the following subsidiaries: Paragon Offshore Finance Company, Paragon International Finance Company, Paragon Offshore Holdings US Inc., Paragon Offshore Drilling LLC, Paragon FDR Holdings Ltd., Paragon Duchess Ltd., Paragon Offshore (Luxembourg) S.à r.l., PGN Offshore Drilling (Malaysia) Sdn. Bhd., Paragon Offshore (Labuan) Pte. Ltd., Paragon Holding SCS 2 Ltd., Paragon Asset Company Ltd., Paragon Holding SCS 1 Ltd., Paragon Offshore Leasing (Luxembourg) S.à r.l., Paragon Drilling Services 7 LLC, Paragon Offshore Leasing (Switzerland) GmbH, Paragon Offshore do Brasil Ltda., Paragon Asset (ME) Ltd., Paragon Asset (UK) Ltd., Paragon Offshore International Ltd., Paragon Offshore (North Sea) Ltd., Paragon (Middle East) Limited, Paragon Holding NCS 2 S.à .r.l., Paragon Leonard Jones LLC, Paragon Offshore (Nederland) B.V., and Paragon Offshore Contracting GmbH


Distribution	The August 1, 2014 pro rata distribution by Noble to its shareholders of all our issued and outstanding ordinary shares. Noble shareholders received one ordinary share of Paragon for every three shares of Noble owned.


Exchange Act	United States Securities Exchange Act of 1934, as amended


FASB	Financial Accounting Standards Board


LIBOR	London Interbank Offered Rate


New Plan	Third amended plan of reorganization for the Debtors as filed with the Bankruptcy Court on February 7, 2017


Noble	Noble Corporation plc


OPEC	Organization of Petroleum Exporting Countries


OTC Pink	Marketplace trading over-the-counter stocks provided and operated by the OTC Markets Group


Pemex	Petróleos Mexicanos


Petrobras	Petróleo Brasileiro S.A.

Prospector Prospector Offshore Drilling S.á.r.l

Revolving Credit Agreement The Company’s senior secured revolving credit agreement entered into with a group of lenders on June 17, 2014

Revolving Credit Facility Commitments in the amount of $800 million provided by a group of lenders under the Revolving Credit Agreement

ROCE Return on capital employed

Table of Contents


Prospector	Prospector Offshore Drilling S.à.r.l.


Revolving Credit Agreement	The Company’s senior secured revolving credit agreement entered into with a group of lenders on June 17, 2014


Revolving Credit Facility	Commitments in the amount of $800 million provided by a group of lenders under the Revolving Credit Agreement


Sale-Leaseback Transaction	Sale-leaseback agreement with subsidiaries of SinoEnergy Capital Management Ltd. for two high specification jackup units, Prospector 1 and Prospector 5 entered into on July 24, 2015


SEC	United States Securities and Exchange Commission


Senior Notes	The Company’s 6.75% senior notes due in 2022 and 7.25% senior notes due in 2024, collectively


Spin-Off	The Company’s separation from Noble on August 1, 2014


Tax Sharing Agreement	Agreement entered into with Noble at Spin-Off which governs the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and certain other matters regarding taxes following the Distribution


Term Loan Agreement	The Company’s senior secured term loan agreement entered into June 18, 2014


Term Loan Facility	The Company’s $650 million term loan debt entered into under the Term Loan Agreement


Total S.A.	Total E&P U.K. Limited and Elf Exploration U.K. Limited


U.K.	United Kingdom


U.S. GAAP	Accounting principles generally accepted in the United States

Table of Contents


PART I.	FINANCIAL INFORMATION


ITEM 1.	UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PARAGON OFFSHORE plc

(DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2016			2015			2016			2015
	2017			2016
Operating revenues
Contract drilling services	$	~~116~~55,~~674~~247		$	~~338~~235,~~710~~044		$	~~516,182~~		$	~~1,101,618~~
Labor contract drilling services	~~4,517~~—			6,~~853~~748			~~16,750~~			~~21,224~~
Reimbursables and other	32,~~887~~196			23,~~410~~328			~~42,201~~			~~70,023~~
	125,078			368,973			575,133			1,192,865
	57,443			265,120
Operating costs and expenses
Contract drilling services	8549,~~109~~592			~~190~~112,~~536~~706			~~289,446~~			~~612,610~~
Labor contract drilling services	~~4,966~~14			45,~~792~~059			~~14,218~~			~~16,086~~
Reimbursables	21,~~778~~576			19,~~517~~784			~~35,870~~			~~58,173~~
Depreciation and amortization	5030,~~270~~575			9571,~~826~~906			~~181,732~~			~~280,574~~
General and administrative	118,~~464~~723			12,~~800~~174			~~33,459~~			~~41,901~~
Loss on impairments	—391			~~1,150,846~~—			—			~~1,152,547~~
(Gain) on sale of assets, net	—			—			—			(12,717		)
	90,871			221,629
(Gain) on repurchase of long-term debt	—			—			—			(4,345		)
Operating income (loss) before interest, reorganization items and income taxes	(33,428		)	43,491
	154,587			1,474,317			554,725			2,144,829
Interest expense, net (contractual interest of $36,080 and $36,106 for the three months ended March 31, 2017 and 2016)	(17,916		)	(27,017		)
Operating income (loss) before interest, reorganization items and income taxes	(29,509		)	(1,105,344		)	20,408			(951,964		)
Other, net	1,751			762
Interest expense, net (contractual interest of $36,610 and $103,729 for the three and nine months ended September 30, 2016)	(18,446		)	(33,900		)	(58,299		)	(93,107		)
Reorganization items, net	(18,474		)	(21,842		)
Other, net	2,804			(983		)	1,512			1,421
Loss before income taxes	(68,067		)	(4,606		)
Reorganization items, net	(17,211		)	—			(56,602		)	—
Income tax provision	(2,349		)	(604		)
Loss before income taxes	(62,362		)	(1,140,227		)	(92,981		)	(1,043,650		)
Net loss	$	(70,416	)	$	(5,210	)
Income tax benefit (provision)	(1,256		)	55,389			(956		)	67,301
Loss per share
Net loss	$	(63,618	)	$	(1,084,838	)	$	(93,937	)	$	(976,349	)
Basic and diluted	$	(0.79	)	$	(0.06	)
Net income attributable to non-controlling interest	—			—			—			(31		)
Weighted-average shares outstanding
Net loss attributable to Paragon	$	(63,618	)	$	(1,084,838	)	$	(93,937	)	$	(976,380	)
Basic and diluted	88,747			86,598
Loss per share
Basic and diluted	$	(0.72	)	$	(12.46	)	$	(1.08	)	$	(11.39	)
Weighted-average shares outstanding
Basic and diluted	87,876			87,077			87,360			85,703

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

PARAGON OFFSHORE plc

(DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2016			2015			2016			2015
	2017			2016
Net loss	$	(6370,~~618~~416	)	$	(15,~~084,838~~210	)	$	~~(93,937~~	)	$	~~(976,349~~	)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments	~~(8,919~~876		)	(52,~~145~~068		)	~~(768~~		)	~~(6,818~~		)
Adjustments to pension plans	69(98		)	~~190~~187			~~455~~			~~570~~
Total other comprehensive loss, net	~~(8,850~~778		)	(42,~~955~~255		)	~~(313~~		)	~~(6,248~~		)
Total comprehensive loss	$	(7269,~~468~~638	)	$	(12,~~089,793~~955	)	$	~~(94,250~~	)	$	~~(982,597~~	)

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

PARAGON OFFSHORE plc

(DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

	September 30,			December 31,
	March 31,			December 31,
	2016			2015
	2017			2016
ASSETS
Current assets
Cash and cash equivalents	$	~~879~~832,~~963~~576		$	~~773~~883,~~571~~794
Restricted cash	2611,~~047~~457			38,~~000~~707
Accounts receivable, net of allowance for doubtful accounts of $34 million and $44 million as of September 30, 2016 and December 31, 2015, respectively	138,121			266,325
Accounts receivable, net of allowance for doubtful accounts (Note 3)	46,763			65,644
Prepaid and other current assets	7361,~~730~~185			~~110~~69,~~027~~380
Total current assets	1951,~~117,861~~981			1,~~152~~027,~~923~~525
Property and equipment, at cost	2,~~687~~334,~~308~~834			2,~~652~~336,~~537~~504
Accumulated depreciation	(1,~~714~~549,~~751~~028		)	(1,~~541~~523,~~439~~732		)
Property and equipment, net	~~972~~785,~~557~~806			1812,~~111,098~~772
Restricted cash	36,~~249~~049			2537,~~030~~880
Other long-term assets	4223,~~041~~658			7325,~~796~~554
Total assets	$	21,~~168~~797,~~708~~494		$	21,~~362~~903,~~847~~731
LIABILITIES AND EQUITY
Current liabilities
Current maturities of long-term debt	$	3029,~~659~~694		$	4029,~~629~~737
Accounts payable and accrued expenses	6961,~~665~~598			8561,~~374~~853
Accrued payroll and related costs	3934,~~570~~055			4843,~~246~~683
Taxes payable	3021,~~930~~440			3433,~~381~~248
Interest payable	~~400~~491			~~34,085~~497
Other current liabilities	3218,~~800~~822			4121,~~174~~548
Total current liabilities	~~204~~166,~~024~~100			~~283~~190,~~889~~566
Long-term debt	~~178~~155,~~500~~330			2165,~~538,444~~963
Deferred income taxes	5,~~188~~141			96,~~373~~282
Other liabilities	3027,~~937~~882			3729,~~731~~114
Liabilities subject to compromise	2,~~343~~344,~~963~~563			—2,344,563
Total liabilities	2,~~762~~699,~~612~~016			2,~~869~~736,~~437~~488
Commitments and contingencies (Note 16)
Commitments and contingencies (Note 17)
Equity
Ordinary shares, $0.01 par value, 186,457,393 shares authorized; with 87,894,997 and 86,026,247 issued and outstanding as of September 30, 2016 and December 31, 2015, respectively	879			860
Ordinary shares, $0.01 par value, 186,457,393 shares authorized; with 89,009,153 and 88,438,804 issued and outstanding as of March 31, 2017 and December 31, 2016, respectively	890			884
Additional paid-in capital	1,~~436~~439,~~373~~132			1,~~429~~438,~~456~~265
Accumulated deficit	(12,~~988~~303,~~829~~664		)	(12,~~894~~233,~~892~~248		)
Accumulated other comprehensive loss	(4237,~~327~~880		)	(4238,~~014~~658		)
Total shareholders’ deficit	(~~593~~901,~~904~~522		)	(~~506~~832,~~590~~757		)
Total liabilities and equity	$	21,~~168~~797,~~708~~494		$	21,~~362~~903,~~847~~731

See accompanying notes to the unaudited condensed consolidated financial statements.

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PARAGON OFFSHORE plc

(DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)

(In thousands)

(Unaudited)

	Ordinary Shares			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			~~Total~~TotalEquity ~~Stockholders’ Equity/~~ (Deficit)			~~Non-ControllingInterest~~			~~TotalEquity (Deficit)~~
	Shares	Amount
Balance as of December 31, 2014	84,753	$	848	$	1,423,153		$	(895,249	)	$	(37,144	)	$	491,608		$	2,641		$	494,249
Balance as of December 31, 2015	86,026	$	860	$	1,429,456		$	(1,894,892	)	$	(42,014	)	$	(506,590	)
Net income (loss)	—	—		—			(976,380		)	—			(976,380		)	31			(976,349		)
Net loss	—	—		—			(5,210		)	—			(5,210		)
Adjustments to distribution by former parent	—	—		(9,493		)	—			—			(9,493		)	—			(9,493		)
Employee related equity activity:
Employee related equity activity:
Amortization of share-based compensation	—	—		1,967			—			—			1,967
Amortization of share-based compensation	—	—		12,791			—			—			12,791			—			12,791
Vesting of restricted stock unit awards	1,345	14		(112		)	—			—			(98		)
Vesting of restricted stock unit awards	1,273	12		(780		)	—			—			(768		)	—			(768		)
Other comprehensive income, net	—	—		—			—			2,255			2,255
Acquisition of Prospector non-controlling interest	—	—		487			—			—			487			(2,672		)	(2,185		)
Balance as of March 31, 2016	87,371	$	874	$	1,431,311		$	(1,900,102	)	$	(39,759	)	$	(507,676	)
Other comprehensive loss, net	—	—		—			—			(6,248		)	(6,248		)	—			(6,248		)
Balance as of December 31, 2016	88,439	$	884	$	1,438,265		$	(2,233,248	)	$	(38,658	)	$	(832,757	)
Balance as of September 30, 2015	86,026	$	860	$	1,426,158		$	(1,871,629	)	$	(43,392	)	$	(488,003	)	$	—		$	(488,003	)
Net loss	—	—		—			(70,416		)	—			(70,416		)
Balance as of December 31, 2015	86,026	$	860	$	1,429,456		$	(1,894,892	)	$	(42,014	)	$	(506,590	)	$	—		$	(506,590	)
Employee related equity activity:
Net loss	—	—		—			(93,937		)	—			(93,937		)	—			(93,937		)
Amortization of share-based compensation	—	—		898			—			—			898
Employee related equity activity:
Vesting of restricted stock unit awards	570	6		(31		)	—			—			(25		)
Amortization of share-based compensation	—	—		7,066			—			—			7,066			—			7,066
Other comprehensive income, net	—	—		—			—			778			778
Vesting of restricted stock unit awards	1,869	19		(149		)	—			—			(130		)	—			(130		)
Balance as of March 31, 2017	89,009	$	890	$	1,439,132		$	(2,303,664	)	$	(37,880	)	$	(901,522	)
Other comprehensive loss, net	—	—		—			—			(313		)	(313		)	—			(313		)
Balance as of September 30, 2016	87,895	$	879	$	1,436,373		$	(1,988,829	)	$	(42,327	)	$	(593,904	)	$	—		$	(593,904	)

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

PARAGON OFFSHORE plc

(DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2016			2015
	2017			2016
Cash flows from operating activities
Net loss	$	(9370,~~937~~416	)	$	(~~976~~5,~~349~~210	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization	~~181~~30,~~732~~575			~~280~~71,~~574~~906
Loss on impairments	—391			~~1,152,547~~—
Gain on sale of assets	—			(12,717		)
Deferred income taxes	(1,176		)	(4,750		)
Gain on repurchase of long-term debt	—			(4,345		)
Share-based compensation	646			2,206
Deferred income taxes	5,208			(70,149		)
Provision for doubtful accounts	238			—
Share-based compensation	7,973			12,937
Other, net	1,047			—
Provision for doubtful accounts	—			26,479
Net change in other assets and liabilities (Note 18)	2,717			42,171
Recoveries of doubtful accounts	(5,878		)	—
Net cash provided by (used in) operating activities	(35,978		)	106,323
Other, net	1,255			—
Net change in other assets and liabilities (Note 17)	148,283			(22,226		)
Net cash provided by operating activities	244,636			386,751
Cash flows from investing activities
Capital expenditures	(363,~~201~~017		)	(~~156~~17,~~753~~866		)
Change in accrued capital expenditures	(~~8,612~~481		)	(115,~~768~~422		)
Proceeds from sale of assets	—			29,316
Change in restricted cash	(919		)	(4,160		)
Acquisition of Prospector Offshore Drilling S.A. non-controlling interest	—			(2,185		)
Net cash used in investing activities	(4,417		)	(27,448		)
Change in restricted cash	(34,266		)	(17,297		)
Net cash used in investing activities	(79,079		)	(158,687		)
Cash flows from financing activities
Net Activity – Revolving Credit Facility	—			11,000
Repayments on Sale-Leaseback Financing	(10,798		)	(16,947		)
Additional Borrowings - Revolving Credit Facility	—			532,000
Tax withholding on restricted stock units	(25		)	(98		)
Net proceeds from Sale-Leaseback Financing	—			291,576
Net cash used in financing activities	(10,823		)	(17,045		)
Repayments on Sale-Leaseback Financing	(59,165		)	(8,365		)
Net change in cash and cash equivalents	(51,218		)	61,830
Repayment of Term Loan Facility	—			(4,875		)
Cash and cash equivalents, beginning of period	883,794			773,571
Repayment of Prospector Senior Credit Facility	—			(265,666		)
Cash and cash equivalents, end of period	$	832,576		$	835,401
Repayment of Prospector Bonds	—			(101,000		)
Supplemental information for non-cash activities (Note 18)
Purchase of Senior Notes	—			(6,546		)
Net cash used in financing activities	(59,165		)	448,124
Net change in cash and cash equivalents	106,392			676,188
Cash and cash equivalents, beginning of period	773,571			56,772
Cash and cash equivalents, end of period	$	879,963		$	732,960
Supplemental information for non-cash activities (Note 17)

See accompanying notes to the unaudited condensed consolidated financial statements.

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PARAGON OFFSHORE plc

(DEBTOR-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—ORGANIZATION, CURRENT EVENTS, AND BASIS OF PRESENTATION ~~AND CURRENT EVENTS~~

Paragon Offshore plc (together with its subsidiaries, “Paragon,” the “Company,” “we,” “us” or “our”) is a global provider of offshore drilling rigs. Our ~~operated~~ fleet includes 34 jackups (including two high specification heavy duty/harsh environment jackups), four drillships and ~~two~~one ~~semisubmersibles~~semisubmersible. Our primary business is contracting our rigs, related equipment and work crews to conduct oil and gas drilling and workover operations for our exploration and production customers on a dayrate basis around the world.

We currently operate in significant hydrocarbon-producing geographies throughout the world, including the North Sea, the Middle East, ~~India, Brazil, Mexico, West Africa~~ and ~~Southeast Asia~~India. As of ~~September~~March 3031, ~~2016~~2017, our contract backlog was $~~365~~183 million and included contracts with ~~leading~~ national, international and independent oil and gas companies.

We are a public limited company registered under the Companies Act 2006 of England. In July 2014, Noble Corporation plc (“Noble”) transferred to us the assets and liabilities (the “Separation”) constituting most of Noble’s standard specification drilling units and related assets, liabilities and business ~~(our “Predecessor”)~~. On August 1, 2014, Noble made a pro rata distribution to its shareholders of all of our issued and outstanding ordinary shares (the “Distribution” and, collectively with the Separation, the “Spin-Off”).

~~Basis~~All financial information presented in this Form 10-Q represents the consolidated results of ~~Presentation~~operations, financial position and cash flows of Paragon.

All financial information presented in this Form 10-Q represents the consolidated results of operations, financial position and cash flows of Paragon. At the Spin-Off, Noble contributed its entire net parent investment in our Predecessor. Concurrent with the Spin-Off and in accordance with the terms of our Separation from Noble, certain assets and liabilities were transferred between us and Noble, which have been recorded as part of the net capital contributed by Noble. During the first quarter of 2015, we recorded an out-of-period adjustment to the opening balance sheet of our Predecessor of approximately $9 million to reflect transfers of fixed assets resulting from the Spin-Off between us and our former parent, as well as revisions in estimates of liabilities associated with the Spin-Off. This adjustment did not affect our Condensed Consolidated Statement of Operations.

On November 17, 2014, we initiated the acquisition of the outstanding shares of Prospector, an offshore drilling company organized in Luxembourg and traded on the Oslo Axess, from certain shareholders and in open market purchases. On February 23, 2015, we acquired all remaining issued and outstanding shares of Prospector. We spent approximately $2 million in the first quarter of 2015 to purchase the remaining issued and outstanding shares of Prospector and funded the purchase using proceeds from our Revolving Credit Facility and cash on hand.

Unaudited Interim Information

The interim consolidated financial statements of Paragon and its subsidiaries are unaudited. However, they include all adjustments of a normal recurring nature that, in the opinion of management, are necessary for a fair statement of the Company’s consolidated financial position as of ~~September~~March 3031, ~~2016~~2017 and the results of its operations and cash flows for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2016~~2017 and ~~2015~~2016. Certain information relating to the Company’s organization and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted in this Form 10-Q pursuant to the rules and regulations of the SEC regarding interim financial reporting.

The ~~2015~~2016 year-end balance sheet data was derived from audited financial statements. This interim report does not include all disclosures required by U.S. GAAP for annual periods and should be read in conjunction with the Annual Report on Form 10-K of Paragon ~~Offshore plc~~ for the year ended December 31, ~~2015~~2016. The interim financial results may not be indicative of the results to be expected for the full year. Certain amounts in prior periods have been reclassified to conform to the current year presentation.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. Our ability to continue as a going concern is contingent upon ~~our~~obtaining ~~development~~the requisite vote of acreditors ~~plan~~and ofthe ~~reorganization,~~Bankruptcy Court’s approval of ~~the~~our plan byof ~~the~~reorganization ~~Bankruptcy~~as ~~Court~~described ~~and~~below. This ~~our~~represents ~~creditors,~~a material uncertainty related to events and conditions that raises substantial doubt on our ability to ~~successfully~~continue ~~implement~~as a ~~plan~~going ofconcern ~~reorganization. This~~and, ~~represents~~therefore, awe ~~material~~may ~~uncertainty~~be ~~related~~unable to utilize our assets and discharge our liabilities in the normal course of business.

During the period that we are operating as debtors-in-possession under chapter 11 of the Bankruptcy Code, we may sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business (and subject to restrictions in our debt agreements), for amounts other than those reflected in the accompanying consolidated financial statements. Further, any reorganization plan could materially change the amounts and classifications of assets and liabilities reported in the consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should we be unable to continue as a going concern. As required by FASB ASC 852, Reorganizations (“ASC 852”), we intend to adopt fresh start accounting upon emergence from chapter 11 of the Bankruptcy Code.

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to events and conditions that raises substantial doubt on our ability to continue as a going concern and, therefore, we may be unable to realize our assets and discharge our liabilities in the normal course of business.

Chapter 11 Filing

On February 12, 2016, the Company and certain of its subsidiaries (collectively, the “Debtors”) entered into a plan support agreement (the “PSA”) relating to a plan of reorganization (including all amendments thereto, the “Original Plan”) pursuant to chapter 11 of the Bankruptcy Code with holders ~~(the “Noteholder Group”)~~ representing an aggregate of 77% of the outstanding $457 million of our 6.75% senior unsecured notes maturing July 2022 ~~(the “2022 Senior Notes”)~~ and the outstanding $527 million of our 7.25% senior unsecured notes maturing August 2024 ~~(the “2024 Senior Notes”)~~ together with lenders ~~(the “Revolver Group”)~~ representing an aggregate of 96% of the amounts outstanding (including letters of credit) under our Revolving Credit Agreement (the “Noteholder Group”).

On February 14, 2016, the Debtors ~~filed~~commenced their chapter 11 cases (the “Bankruptcy cases”) by filing voluntary petitions for relief under chapter 11 of the Bankruptcy Code in the Bankruptcy Court. Upon (filing the “Bankruptcy cases”), we began trading on the OTC Pink.

On April 619, 2016, the Bankruptcy Court approved the Company’s disclosure statement, ~~which~~and ~~included~~certain aamendments ~~revised~~to ~~plan~~the Original Plan.

OnEffective August 5, 2016, wethe ~~reached~~Company anentered ~~agreement~~into ~~in principle with~~ an adamendment ~~hoc~~to ~~committee of~~ the ~~holders~~PSA ~~of our Senior Notes~~ (the “~~Noteholders~~PSA Amendment”) ~~and~~with ~~a steering committee of~~ the lenders under ~~the~~our Revolving Credit ~~Facility~~Agreement (the “Revolver Lenders”) ~~for~~and alenders ~~proposed~~holding ~~amendment~~approximately to69% ~~the~~in ~~PSA~~principal ~~(the~~amount ~~“PSA~~of ~~Amendment”),~~our ~~which~~Senior ~~among~~Notes. ~~other~~The ~~things,~~PSA ~~provides~~Amendment ~~for~~supported ancertain ~~extension~~revisions ofto ~~certain~~the ~~milestone~~Original ~~dates~~Plan. On ~~and~~August ~~contains~~15, ~~amendments~~2016, tothe Debtors filed the amended Original Plan and a supplemental disclosure statement with the Bankruptcy Court.

~~Additionally,~~By oral ruling on ~~August~~October 528, 2016, ~~the Debtors filed an amended~~ and ~~restated~~by ~~plan~~written oforder ~~reorganization~~dated ~~(the~~November ~~“Amended Plan”) and a supplemental disclosure statement (the “Supplemental Disclosure Statement”) with the Bankruptcy Court. On August 10~~15, 2016, the ~~Company~~Bankruptcy ~~received~~Court ~~signatures~~denied toconfirmation ~~the PSA Amendment from 100%~~ of the ~~Revolver~~Debtors’ ~~Lenders~~amended Original Plan. ~~Together~~Consequently, ~~with~~on ~~the~~November ~~signatures~~29, ~~already~~2016, ~~received from~~ the ~~Noteholders~~Noteholder ofGroup ~~approximately~~terminated ~~69% in principal amount of our Senior Notes,~~ the PSA ~~Amendment became~~ effective as of ~~August~~December 52, 2016.

On ~~October~~January 2818, ~~2016~~2017, the ~~Bankruptcy~~Company ~~Court~~announced ~~issued~~that it reached agreement in principle with a steering committee of lenders under our Revolving Credit Agreement and an ~~oral~~ad ~~ruling~~hoc ~~denying~~committee ~~confirmation~~of lenders under our Term Loan Agreement to support a new chapter 11 plan of reorganization for the Debtors’ ~~Amended~~(the “New Plan”). ~~Paragon~~On isFebruary ~~currently~~7, ~~evaluating~~2017, ~~its~~the ~~potential~~Company ~~courses~~filed ofthe ~~action. As~~New aPlan ~~result~~and ofrelated disclosure statement with the Bankruptcy Court. ~~not~~The ~~confirming~~New Plan provides for, among other things, the ~~Debtors~~(i) elimination of approximately $2.4 billion of the Company’s ~~Amended~~existing debt in exchange for a combination of cash, debt and new equity to be issued under the New Plan; (ii) allocation to the Revolver Lenders and lenders under our Term Loan Agreement (collectively, the “Secured Lenders”) of new senior first lien debt in the original aggregate principal amount of $85 million maturing in 2022; (iii) projected distribution to the Secured Lenders of approximately $418 million in cash, subject to adjustment on oraccount ~~before~~of ~~October~~claims 31reserves and working capital and other adjustments at the time of the Company’s emergence from the Bankruptcy cases, ~~2016~~and an estimated 58% of the new equity of the reorganized company; (iv) projected distribution to holders of the Company’s Senior Notes (the “Bondholders”) of approximately $47 million in cash, subject to adjustment on account of claims reserves and working capital and other adjustments at the ~~Noteholders~~time of the Company’s emergence from the Bankruptcy cases, and an estimated 42% of the ~~Revolver~~new ~~Lenders~~equity ~~each~~of ~~have~~the reorganized company; and (v) commencement of an administration of the ~~right~~Company in the United Kingdom to, ~~terminate~~among other things, implement a sale of all or substantially all of the ~~PSA~~assets ~~upon~~of ~~three~~the ~~business~~Company ~~days’~~to ~~notice~~a new holding company to be formed, which administration may be effected on or prior to effectiveness of the New Plan.

~~Debtors~~On April 21, 2017, following further discussions with the Secured Lenders, the Company filed an amendment to the New Plan and a related disclosure statement with the Bankruptcy Court. This amendment makes certain modifications to the New Plan, among other changes, to: (i) no longer seek approval of the Noble Settlement Agreement (as defined below); (ii) provide for a combined class of general unsecured creditors, including the Company’s 6.75% senior unsecured notes maturing July 2022 and 7.25% senior unsecured notes maturing August 2024; and (iii) provide for the post-inemergence wind-~~Possession~~down of certain of the Debtors’ dormant subsidiaries and discontinued businesses.

~~Since~~On ~~the~~May ~~filing~~2, ~~date~~2017, ~~the~~as ~~Debtors~~a ~~have~~result ~~operated~~of ~~their~~a ~~business~~successful ~~as “debtors~~court-~~in-possession.” Under~~ordered ~~the~~mediation ~~Bankruptcy~~process ~~cases,~~with ~~the~~representatives ~~Debtor’s~~of ~~trade creditors and vendors are being paid in full in~~ the ~~ordinary~~Secured ~~course~~Lenders ~~of business~~ and ~~all~~the ofBondholders, the Company’s ~~contracts~~filed ~~have~~additional ~~remained~~amendments into ~~effect~~the inNew ~~accordance~~Plan ~~with~~(as ~~their~~amended, ~~terms~~the ~~preserving~~“Consensual ~~the~~Plan”) ~~rights~~and ofa ~~all~~related ~~parties. Certain~~disclosure ~~subsidiaries~~statement ofwith the ~~Company~~Bankruptcy ~~were~~Court. ~~not~~The ~~party~~Consensual toPlan ~~the~~resolves ~~chapter 11 filing (~~the ~~“Non-Filing~~objections ~~entities”). The~~previously ~~Non-Filing~~raised ~~entities~~by ~~have~~the ~~continued~~Bondholders to ~~operate in~~ the ~~ordinary~~New ~~course of business~~Plan.

~~Settlement~~Under ~~with~~the ~~Noble~~Consensual ~~Corporation~~Plan, approximately $2.4 billion of previously existing debt will be eliminated in exchange for a combination of cash and to-be-issued new equity. If confirmed, the Secured Lenders will receive their pro rata share of $410 million in cash and 50% of the new, to-be-issued common equity, subject to dilution. The Bondholders will receive $105 million in cash and an estimated 50% of the new, to-be-issued common equity, subject to dilution. The Secured Lenders and Bondholders will each appoint three members of a new board of directors to be constituted upon emergence of the Company from bankruptcy and will agree on a candidate for Chief Executive Officer who will serve as the seventh member of the board of directors of the Company. Certain other elements of the New Plan remain unchanged in the Consensual Plan, including that: (i) the Secured Lenders shall be allocated new senior secured first lien debt in the original aggregate principal amount of $85 million maturing

On February 12, 2016, we entered into a binding term sheet (the “Term Sheet”) with Noble with respect to the “Noble Settlement Agreement” (as described below), which we executed on April 29, 2016. The Noble Settlement Agreement will become effective upon the effective date of the Debtors’ plan of reorganization if such plan is substantially similar to the Debtors’ Plan filed with the PSA. In light of the Bankruptcy Court’s order on October 28, 2016, we intend to discuss this requirement with Noble if the Debtors elect to pursue a plan of reorganization that will not fulfill this condition to the Noble Settlement Agreement. The Noble Settlement Agreement provides that Noble may only unilaterally terminate the Noble Settlement Agreement if: (i) the Debtors’ file a plan of reorganization with the Bankruptcy Court that does not incorporate the terms and conditions of the Noble Settlement Agreement, (ii) the Debtors file a motion before the Bankruptcy Court to terminate their obligations under the Noble Settlement Agreement, or (iii) the release of claims by the Debtors in favor of Noble, as detailed below, is deemed invalid or unenforceable.

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~~Pursuant~~in to2022, (ii) the ~~Noble~~Company ~~Settlement~~shall ~~Agreement,~~commence ~~Noble~~an ~~will~~administration ~~provide~~proceeding ~~direct bonding~~ in ~~fulfillment~~the ofUnited ~~the~~Kingdom, ~~requirements~~and ~~necessary~~(iii) tothe ~~challenge~~Company’s ~~tax~~current ~~assessments~~shareholders inare ~~Mexico~~not ~~relating~~expected to ~~our~~have ~~business~~any ~~for~~recovery under the ~~tax~~Consensual ~~years~~Plan. Both ~~2005 through 2010 (~~the ~~“Mexican Tax Assessments”)~~U.S. ~~The~~Trustee ~~Mexican~~and ~~Tax~~the ~~Assessments~~Bankruptcy ~~were~~Court ~~originally~~have ~~assigned~~declined to usappoint byan ~~Noble~~equity ~~pursuant~~committee toin the ~~Tax~~Bankruptcy ~~Sharing~~cases. ~~Agreement~~The ~~which~~Consensual ~~was~~Plan ~~entered~~will ~~into~~be insubject ~~connection~~to ~~with~~usual ~~the Spin-Off. See Note 16 - “Commitments~~ and ~~Contingencies”~~customary ~~for~~conditions ~~additional~~to ~~information. The~~plan ~~Company~~confirmation, ~~has~~including ~~contested~~obtaining ~~or intends to contest~~ the ~~Mexico~~requisite ~~Tax~~vote ~~Assessments~~of creditors and ~~may~~approval beof ~~required~~the toBankruptcy ~~post bonds in connection thereto~~Court.

In addition, on August 5, 2016, we entered into a binding term sheet with respect to an amendment to the Noble Settlement Agreement (the “Noble Settlement Agreement Amendment”). Upon effectiveness of the Noble Settlement Agreement Amendment, certain provisions of the Tax Sharing Agreement will be further amended to permit us, at our option, to defer up to $5 million Debtors-in amounts owed to Noble under the Tax Sharing Agreement with respect to the Mexican Tax Assessments (the “Deferred Noble Payment Amount”). In consideration for this deferral, we would issue an unsecured promissory note to Noble in the amount of the Deferred Noble Payment Amount (the “Noble Note”) which would be due and payable on the fourth anniversary of the effective date of the Amended Plan. The Noble Note would accrue interest, quarterly, to be paid either: (x) in cash at 12% per annum, or (y) in kind at 15% per annum (in our discretion).-Possession

AsSince offiling ~~September~~the ~~30,~~Bankruptcy ~~2016~~cases, ~~our~~the ~~estimated~~Debtors ~~Mexican~~have ~~Tax~~operated ~~Assessments~~their ~~totaled~~business ~~approximately~~as ~~$172~~“debtors-in-possession”. Under ~~million~~the Bankruptcy cases, ~~with~~the ~~assessments~~Debtor’s ~~for~~trade ~~2009~~creditors and ~~2010~~vendors ~~yet~~are tobeing bepaid ~~received. Noble~~in ~~will~~full bein ~~responsible~~the ~~for~~ordinary ~~all~~course of ~~the~~business. Certain ~~ultimate~~subsidiaries ~~tax~~of ~~liability~~the ~~for~~Company ~~Noble~~were ~~legal~~not ~~entities~~party ~~and~~to ~~50% of~~ the ~~ultimate~~chapter ~~tax~~11 ~~liability~~filing ~~for~~(the ~~our~~“Non-Filing ~~legal~~entities”). The Non-Filing entities ~~relating~~have continued to operate in the ~~Mexican~~ordinary ~~Tax~~course ~~Assessments~~of business.

InLitigation consideration for this support, we have agreed to release Noble, fully and unconditionally, from any and all claims in relation to the Spin-Off. Upon the effectiveness of the Noble Settlement Agreement, a material portion of our Mexican Tax Assessments, and any corresponding ultimate tax liability, will be assumed by Noble on the Effective Date in connection with ~~certain amendments to the Tax Sharing Agreement executed between~~ Noble ~~and~~Corporation ~~Paragon for the Spin-Off. Until such time, the current Tax Sharing Agreement remains in effect.~~

On February 12, 2016, we entered into a binding term sheet with Noble with respect to the “Noble Settlement Agreement” (as described below), which we executed on April 29, 2016. The Noble Settlement Agreement would have become effective upon the consummation of the Original Plan, or a plan of reorganization substantially similar thereto, and the satisfaction of certain other conditions precedent as set forth in the Noble Settlement Agreement. Pursuant to the Noble Settlement Agreement, Noble would have provided direct bonding in fulfillment of the requirements necessary to challenge tax assessments in Mexico relating to our business for the tax years 2005 through 2010 (the “Mexican Tax Assessments”). Additionally, pursuant to the Noble Settlement Agreement, Noble would have been responsible for all of the ultimate tax liability for Noble legal entities and 50% of the ultimate tax liability for our legal entities following the defense of the Mexican Tax Assessments. In consideration for this support, we had agreed to release Noble, fully and unconditionally, from any and all claims in relation to the Spin-Off.

On April 21, 2017, we filed our amendment to the New Plan with the Bankruptcy Court. Under the New Plan, we do not intend to seek approval of the Noble Settlement Agreement with the Bankruptcy Court. As a result, on April 21, 2017, Noble terminated the Noble Settlement Agreement.

On May 2, 2017, the Company filed further amendments to the New Plan (the Consensual Plan) and a related disclosure statement with the Bankruptcy Court. Pursuant to the Consensual Plan, the Company’s creditors will pursue litigation against Noble through the establishment of a litigation trust (the “Litigation Trust”), which the Company will fund with a loan of up to $10 million (the “Litigation Loan Amount”). Under the Consensual Plan, the first $10 million of proceeds from the litigation against Noble will be applied to repay the Litigation Loan Amount, and any balance of the first $10 million of proceeds will be shared 50%/50% between the Bondholders and Secured Creditors. Any amounts above the first $10 million of proceeds will be split in a ratio of 75%/25% in favor of the Bondholders.

NOTE 2—NEW ACCOUNTING PRONOUNCEMENTS

In May 2014, the FASB issued ASU No. 2014-09 (“ASU 2014-09”), which creates ASC Topic 606, Revenue from Contracts with Customers and supersedes the revenue recognition requirements in Topic 605 and industry-specific standards that currently exist under U.S. GAAP. The amendments in this ASU are intended to provide a more robust framework for addressing revenue issues, improve comparability of revenue recognition practices and improve disclosure requirements. The core principle of Topic 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that the entity expects to be entitled to in exchange for those goods or services. Based on ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, issued in August 2015, the amendments in this ASU are effective for financial statements issued for annual reporting periods beginning after December 15, 2017, and interim periods within that reporting period. The Company is not permitted to adopt this standard earlier than the original effective date for public entities. This ASU can be adopted either retrospectively or as a cumulative-effect adjustment as of the date of adoption. In March, April, May and ~~May~~November 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, ~~and~~ ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients, ~~respectively. These~~and ~~updates~~ASU ~~are~~2016-20, ~~not~~Technical ~~intended~~Corrections toand ~~change~~Improvements ~~the~~to ~~core~~Topic ~~principles~~606, ofRevenue ~~ASU~~from ~~No.~~Contracts ~~2014-09~~with ~~but~~Customers, ~~instead~~respectively. These updates clarify important aspects of the guidance and improve its operability and implementation. ASC onTopic ~~such~~606 ~~topics~~is ~~as:~~effective ~~principal~~for ~~versus~~financial ~~agent~~statements ~~considerations~~issued infor ~~revenue~~annual ~~transactions~~reporting periods beginning after December 15, ~~goods~~2017, orand ~~services~~interim periods within that reporting period. We are ~~“separately~~evaluating ~~identifiable”~~the ~~performance~~provisions ~~obligations~~of ASU 2014-09, ~~collectability~~concurrently with the provisions of ASU 2016-02 (defined below) since we have determined that our drilling contracts contain a lease component, ~~noncash~~and ~~consideration~~our adoption of ASU 2016-02, therefore, will require that we separately recognize revenues associated with lease and ~~presentation~~nonlease components. Nonlease components or the provision of ~~sales~~contract ~~taxes~~drilling services will be accounted for under ASU 2014-09. ~~These~~We ~~updates~~are ~~have~~in the ~~same~~process ~~effective~~of ~~date~~reviewing our revenue streams under these ASUs and ~~transition~~have ~~requirements~~identified asa subset of contracts that we believe are representative of our operations and have initiated an analysis of the ~~new~~related ~~revenue~~performance ~~standard~~obligations and pricing arrangements in such contracts. We are still evaluating methods of adoption and what impact the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures which will be based on contract-specific facts and ~~have~~circumstances ~~not~~that ~~decided~~could ~~upon~~introduce avariability ~~method~~to the timing of ~~adoption~~our revenue recognition relative to current accounting standards.

In February 2016, the FASB issued ASU No. 2016-02, which creates ASC Topic 842, Leases. This ASU requires an entity to separate lease components from nonlease components in a contract. The lease components would be accounted for under ASU 2016-02, which requires lessees to recognize a right-of-use asset and a lease liability for capital and operating leases with lease terms greater than twelve months. Lessors must align certain requirements with the updates to lessee accounting standards and potentially derecognize a leased asset and recognize a net investment in the lease. This ASU also requires key qualitative and quantitative disclosures by lessess and lessors to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases. We are evaluating the provisions of ASU 2016-02, concurrently with the provisions of ASU 2014-09, Revenue from Contracts with Customers (Topic 606) since nonlease components would be accounted for under ASU 2014-09. This update is effective for financial statements issued for annual reporting periods beginning after December 15, 2018, and interim reporting periods within that reporting period. Early adoption is permitted. A modified

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In February 2016, the FASB issued ASU No. 2016-02, which creates ASC Topic 842, Leases (“ASU 2016-02”). This ASU requires an entity to separate lease components from nonlease components in a contract. The lease components would be accounted for under ASU 2016-02, which requires lessees to recognize a right-of-use asset and a lease liability for capital and operating leases with lease terms greater than twelve months. Lessors must align certain requirements with the updates to lessee accounting standards and potentially derecognize a leased asset and recognize a net investment in the lease. This ASU also requires key qualitative and quantitative disclosures by lessees and lessors to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases. This update is effective for financial statements issued for annual reporting periods beginning after December 15, 2018, and interim reporting periods within that reporting period. Early adoption is permitted. A modified retrospective approach is required. Under this ASU, we have determined that our drilling contracts contain a lease component, and our adoption, therefore, will require that we separately recognize revenues associated with the lease and service components. We are evaluating the provisions of ASU 2016-02, concurrently with the provisions of ASU 2014-09 and expect to adopt both updates concurrently with an effective date of January 1, 2018. We are still evaluating what impact the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.

In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which amends ASC Topic 718, Compensation - Stock Compensation. The ASU includes provisions intended to simplify the accounting for and presentation of share-based payment transactions, including such areas as income tax effects, minimum statutory tax withholding requirements and classification of awards as either equity or liabilities, forfeitures, and the classification on the statement of cash flows. The guidance is effective for financial statements issued for annual reporting periods beginning after December 15, 2016, and interim periods within that reporting period. Early adoption is permitted in any interim or annual period, with any adjustments reflected as of the beginning of the fiscal year of adoption. Transition methods vary for the related amendments. We do not expect that our adoption will have a material impact on our financial condition, results of operations, cash flows or financial disclosures.

In June 2016, the FASB issued ASU No. 2016-13, which creates ASC Topic 326, Financial Instruments - Credit Losses. The new guidance introduces new accounting models for expected credit losses on financial instruments and applies to: (1) loans, accounts receivable, trade receivables and other financial assets measured at amortized cost, (2) loan commitments and certain other off-balance sheet credit exposures, (3) debt securities and other financial assets measured at fair value through other comprehensive income, and (4) beneficial interests in securitized financial assets. The scope of the new guidance is broad and is designed to improve the current accounting models for the impairment of financial assets. The guidance is effective for financial statements issued for annual reporting periods beginning after December 15, 2019, and interim periods within that reporting period. Early adoption is permitted for annual reporting periods beginning after December 15, 2018, and interim periods within that reporting period. A modified retrospective approach is required. We are evaluating what impact the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.

In August 2016 the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, a consensus of the FASB’s Emerging Issues Task Force. The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The ASU addresses how the following cash transactions are presented: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon debt instruments; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies; (6) distributions received from equity method investments; and (7) beneficial interests in securitization transactions. The ASU also addresses how to present cash receipts and cash payments that have aspects of multiple cash flow classifications. The guidance is effective for financial statements issued for annual reporting periods beginning after December 15, 2017, and interim periods within that reporting period. Early adoption is permitted provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method. We do not expect that our adoption will have a material impact on our cash flows or financial ~~disclosure~~disclosures.

In October 2016 the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Consequently, the amendments in this ASU eliminate the exception for an intra-entity transfer of an asset other than inventory. The guidance is effective for financial statements issued for annual reporting periods beginning after December 15, 2017, and interim periods within ~~annual~~that ~~periods~~reporting ~~beginning after December 15, 2019~~period. Early adoption is permitted for all entities as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been made available for issuance. This ASU should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. WeThe ~~are~~Company ~~considering~~has elected early adoption of this ~~ASU~~guidance ~~effective~~on ~~January~~a 1,modified ~~2017~~retrospective ~~and~~basis. Early doadoption ~~not~~had ~~expect~~no ~~that~~impact ~~our~~on ~~adoption~~prior ~~will~~periods ~~have~~as areported ~~material~~in ~~impact on~~ our financial ~~condition,~~statements ~~results~~for ofthe ~~operations,~~quarter ~~cash~~ended ~~flows~~March or31, ~~financial disclosures~~2017.

~~NOTE~~In 3—November ~~SIGNIFICANT~~2016 ~~ACCOUNTING~~the ~~POLICIES~~FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and restricted cash. The new guidance is intended to reduce diversity in practice on the presentation of restricted cash in the statement of cash flows. The guidance is effective for financial statements issued for annual reporting periods beginning after December 15, 2017, and interim periods within that reporting period. Early adoption is permitted, including adoption in an interim period. This ASU should be applied using a retrospective transition method to each period presented. We are evaluating what impact the adoption of this guidance will have on our financial condition, results of operations, cash flows or financial disclosures.

Our unaudited condensed consolidated financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. Actual results could differ from those estimates. The significant accounting policies and estimates below update and supplement those described in our Annual Report on Form 10-K for the year ended December 31, 2015.

Reorganization Accounting

In connection with filing chapter 11 of the Bankruptcy Code on February 14, 2016, the Company is subject to the

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~~requirements~~In ofJanuary 2017 the FASB ~~ASC~~issued ~~852~~ASU No. 2017-01, ~~Reorganizations~~Business Combinations (~~“ASC~~Topic ~~852”~~805).: ~~ASC852~~Clarifying isthe ~~applicable~~Definition toof ~~companies~~a ~~under~~Business. The ~~bankruptcy~~amendments ~~protection~~in ~~and~~this ~~requires~~update ~~amendments~~provide a more robust framework to ~~the~~use ~~presentation~~in determining when a set of ~~key~~assets ~~financial~~and ~~statement~~activities ~~line~~is ~~items~~a business. ~~ASC~~The ~~852~~objective ~~generally~~of ~~does~~this ~~not~~ASU ~~change~~is ~~the~~to ~~manner~~add guidance that will assist entities in ~~which~~evaluating ~~financial~~whether ~~statements~~transactions ~~are~~should ~~prepared. However~~be accounted for as acquisitions (or disposals) of assets or businesses and may affect many areas of accounting including acquisitions, itdisposals, ~~does~~goodwill ~~require~~and ~~that~~consolidations. The ~~the~~guidance is effective for financial statements issued for annual reporting periods ~~subsequent~~beginning toafter ~~the~~December ~~filing~~15, of2017, and interim periods within that reporting period. The amendments in this update should be applied prospectively on or after the ~~Bankruptcy~~effective ~~cases~~date. No ~~distinguish~~disclosures ~~transactions~~are ~~and~~required ~~events~~at transition. We do not expect that ~~are~~our ~~directly~~adoption ~~associated~~will ~~with~~have ~~the~~a ~~reorganization~~material ~~from~~impact ~~the~~on ~~ongoing~~our ~~operations~~financial condition, results of operations, cash flows or financial disclosures and the impact will be based on whether it is necessary for us to determine if we have acquired or sold a business in any period after the effective date.

~~Revenues,~~In ~~expenses~~February 2017, ~~realized~~the ~~gains~~FASB ~~and~~issued ~~losses,~~ASU ~~and~~No. ~~provisions~~2017-05, ~~for~~Other ~~losses~~Income ~~that~~- ~~can~~Gains beand ~~directly~~Losses ~~associated~~from ~~with~~ the ~~reorganization~~Derecognition of ~~the~~Nonfinancial ~~business~~Assets ~~must~~(Subtopic be610-20): ~~reported~~Clarifying ~~separately as reorganization items in~~ the ~~consolidated~~Scope ~~statements~~ of ~~operations~~Asset ~~for~~Derecogntion ~~the~~Guidance ~~three~~ and ~~nine~~Accounting ~~months~~for ~~ended~~Partial ~~September~~Sales ~~30,~~of ~~2016. The~~Nonfinancial ~~balance~~Assets ~~sheet~~which ~~must~~will ~~distinguish~~be ~~pre-petition~~effective ~~liabilities~~at ~~subject~~the tosame ~~compromise~~time ~~from~~as ~~both~~ASC ~~those~~Topic ~~pre-petition~~606. ASU ~~liabilities~~No. ~~that~~2017-05 ~~are~~clarifies ~~not~~the ~~subject~~scope, todefinition ~~compromise~~ and ~~from~~accounting ~~post-petition~~of ~~liabilities.~~a ~~Liabilities~~financial asset that ~~may~~meets ~~be affected by~~ the ~~plan~~definition of ~~reorganization~~an ~~must~~“in-substance benonfinancial ~~reported~~asset” atand ~~the~~adds ~~amounts~~guidance ~~expected to be allowed by the Bankruptcy Court, even if they may be settled~~ for ~~lesser~~partial ~~amounts~~sales ~~as a result~~ of ~~the~~nonfinancial ~~plan of reorganization~~assets. We ~~See~~are ~~Note~~evaluating 9what -impact ~~“Reorganization~~the ~~Items”~~adoption ~~for~~of ~~cash~~this ~~paid~~guidance ~~for~~will ~~reorganization~~have ~~items~~on inour ~~the~~financial ~~consolidated~~condition, ~~statements~~results of operations, cash flows or financial disclosures.

In March 2017 the FASB issued ASU No. 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The amendments in this update require that an employer disaggregate the service cost component from the other components of net benefit cost and provide guidance on how to present the service cost component and the other components of net benefit cost in the income statement. The guidance is effective for financial statements issued for annual reporting periods beginning after December 15, 2017, and interim periods within that reporting period. The amendment for the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost should be applied retrospectively. We do not expect that our adoption will have a material impact on our financial condition, results of operations, cash flows or financial disclosures.

NOTE 3— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The unaudited condensed consolidated financial statements include our accounts, those of our wholly-owned subsidiaries and entities in which we hold a controlling financial interest. All significant intercompany accounts and transactions have been eliminated in consolidation.

Reorganization Accounting

In connection with filing chapter 11 of the Bankruptcy Code on February 14, 2016, the Company is subject to the requirements of ASC 852. ASC852 is applicable to companies under bankruptcy protection and requires amendments to the presentation of key financial statement line items. ASC 852 generally does not change the manner in which financial statements are prepared. However, it does require that the financial statements for periods subsequent to the filing of the Bankruptcy cases distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business.

Revenues, expenses, realized gains and losses, and provisions for losses that can be directly associated with the reorganization of the business must be reported separately as reorganization items in the consolidated statements of operations for the three months ended March 31, 2017. The balance sheet must distinguish pre-petition liabilities subject to compromise from both those pre-petition liabilities that are not subject to compromise and from post-petition liabilities. Liabilities subject to compromise are pre-petition obligations that are not fully secured and that have at least a possibility of not being repaid at the full claim amount by the plan of reorganization. Liabilities subject to compromise must be reported at the amounts expected to be allowed by the Bankruptcy Court, even if they may be settled for lesser amounts as a result of the plan of reorganization. See Note 9 - “Reorganization Items” for cash paid for reorganization items in the consolidated statements of cash flows.

As required by ASC 852 we intend to adopt fresh start accounting upon emergence from chapter 11 of the Bankruptcy Code.

Revenue Recognition

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under a drilling contract, as the basis for our revenue recognition. Revenues generated from our dayrate basis drilling contracts and labor contracts are recognized on a per day basis as services are performed and begin upon the contract commencement, as defined under the specified drilling or labor contract. Dayrate revenues are typically earned, and contract drilling expenses are typically incurred ratably over the term of our drilling contracts. We review and monitor our performance under our drilling contracts to confirm the basis for our revenue recognition. Revenues from bonuses are recognized when earned.

It is typical in our dayrate drilling contracts to receive compensation and incur costs for mobilization, equipment modification, or other activities prior to the commencement of the contract. Any such compensation may be paid through a lump-sum payment or other daily compensation. Pre-contract compensation and costs are deferred until the contract commences. The deferred pre-contract compensation and costs are amortized, using the straight-line method, into income over the term of the initial contract period, regardless of the activity taking place. This approach is consistent with the economics for which the parties have contracted. Once a contract commences, we may conduct various activities, including drilling and well bore related activities, rig maintenance and equipment installation, movement between well locations or other activities.

Deferred revenues from drilling contracts totaled $7 million and $9 million as of March 31, 2017 and December 31, 2016, respectively. Such amounts are included in either “Other current liabilities” or “Other liabilities” in our Condensed Consolidated Balance Sheets, based upon the expected time of recognition of such deferred revenues. Deferred costs associated with deferred revenues from drilling contracts totaled $2 million at March 31, 2017 as compared to $3 million as of December 31, 2016. Such amounts are included in either “Prepaid and other current assets” or “Other assets” in our Condensed Consolidated Balance Sheets, based upon the expected time of recognition of such deferred costs.

We record reimbursements from customers for “out-of-pocket” expenses as revenues and the related direct cost as operating expenses.

Restricted Cash

Restricted cash consists of both cash held to satisfy the requirements of our Sale-Leaseback Transaction (as described in Note 7 - “Debt”), which was executed in 2015 and cash collateral for an outstanding performance bond.

Under the terms of the Lease Agreements (as defined in Note 7 - “Debt”) we are required to maintain three cash reserve accounts: a capital expenditure reserve account, an operating reserve account and a rental reserve account.

The capital expenditure reserve is available specifically for special survey costs (3-5 year surveys) provided that we replenish any amount withdrawn within twelve months from the date of the withdrawal. This cash is available to us, for a designated purpose, in the short-term, and therefore the restricted cash balance is included in short-term “Restricted cash” on our Condensed Consolidated Balance Sheet. The short-term restricted cash balance also includes funds accumulated in an operating reserve account used for payment of monthly operating expenses under the terms of the Lease Agreements. Our short-term restricted cash was $11 million and $9 million as of March 31, 2017 and December 31, 2016, respectively.

The rental reserve account is the minimum amount established under the Lease Agreements which we are required to maintain on reserve at all times during the lease period. The balance in the account increases with periodic deposits of operating revenue in excess of allowed operating expenses. Any amount of cash in the account in excess of the minimum balance required on reserve is to be used repay our long-term debt obligation related to the Sale-Leaseback Transaction. In addition to the Sale-Leaseback Transaction rental reserve account, the long-term restricted cash balance as of March 31, 2017 and December 31, 2016 also includes $9 million cash collateral for an outstanding performance bond. Our long-term restricted cash was $36 million and $38 million as of March 31, 2017 and December 31, 2016, respectively.

Allowance for Doubtful Accounts

We utilize the specific identification method for establishing and maintaining allowances for doubtful accounts. We review accounts receivable on a quarterly basis to determine the reasonableness of the allowance. The Company monitors the accounts receivable from its customers for any collectability issues. An allowance for doubtful accounts is established based on reviews of individual customer accounts, recent loss experience, current economic conditions, and other pertinent factors.

Our allowance for doubtful accounts was $3426 million and $4425 million as of ~~September~~March 3031, ~~2016~~2017 and December 31, ~~2015~~2016, respectively. We had no$0.2 ~~recoveries~~million ~~for~~of ~~the~~bad ~~three~~debt ~~months~~expense ~~ended September 30, 2016,~~ and $6no ~~million of~~ recoveries for the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017. We ~~compared~~had tono bad debt expense ofor ~~$12~~recoveries ~~million and $27 million~~ for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2015, respectively~~2016. Bad debt expense and recoveries are reported as a component of “Contract drilling services operating costs and expenses” in our Condensed Consolidated Statements of Operations.

~~Debt Issuance Costs~~15

InTable ~~the first quarter~~ of 2016, we adopted the guidance issued by the FASB in April 2015 in ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs. Debt issuance costs are presented on the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount and are being amortized over the life of the debt. In our December 31, 2015 Condensed Consolidated Balance Sheet presented in this Form 10-Q, we reclassified $21 million of debt issuance costs for our Senior Notes, Term Loan Facility, and Sale-Leaseback Transaction from “Other assets” to “Long-term debt” to conform to the current period presentation of debt issuance costs. Contents

Debt issuance costs related to line of credit arrangements will continue to be classified in “Other assets” on the Condensed Consolidated Balance Sheets; however, as a result of the filing of the Bankruptcy cases, debt issuance costs related to our Revolving Credit Facility have been classified as liabilities subject to compromise in the Condensed Consolidated Balance Sheet as of September 30, 2016. For our debt securities that are considered to be liabilities subject to compromise, we ceased to amortize deferred debt issuance costs through interest expense. (See Note 8 Long-lived ~~“Liabilities~~Assets ~~Subject~~and ~~to Compromise”).~~Impairments

Property and equipment is stated at cost. Major replacements and improvements are capitalized. When assets are sold, retired or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and the gain or loss is recognized. Property and equipment are depreciated using the straight-line method over their estimated useful lives as of the date placed in service or date of major refurbishment.

Scheduled maintenance of equipment is performed based on the number of hours operated in accordance with our preventative maintenance program. Routine repair and maintenance costs are charged to expense as incurred.

The estimated useful lives of our property and equipment are as follows:



	Years
Drilling rigs	7 - 30
Drilling machinery and equipment	3 - 5
Other	3 - 10

The amount of depreciation expense we record is dependent upon certain assumptions, including an asset’s estimated useful life, rate of consumption and corresponding salvage value. We periodically review these assumptions and may change one or more of these assumptions. Changes in our assumptions may require us to recognize, on a prospective basis, increased or decreased depreciation expense.

We evaluate the impairment of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For assets classified as held and used, we determine recoverability by evaluating the estimated undiscounted future net cash flows based on projected dayrates and utilization. For property and equipment whose carrying values are determined not to be recoverable, we calculate an impairment loss as a difference between the fair value and carrying amount. We estimate the fair values by applying either an income approach, using projected discounted cash flows, or a market approach. For discussion related to our impairment analysis see Note 4 - “Property and Equipment and Other Assets.”

NOTE 4—PROPERTY AND EQUIPMENT AND OTHER ASSETS

~~Loss~~ onProperty ~~Impairment~~and equipment consists of drilling rigs, drilling machinery and equipment and other property and equipment.

We assess the recoverability of our long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable (such as, but not limited to, cold stacking a rig, the expectation of cold stacking a rig in the near term, a decision to retire or scrap a rig, or excess spending over budget on a newbuild, construction project or major rig upgrade). An impairment loss on our property and equipment exists when the estimated fair value, which is based on estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition, is less than its carrying amount. Estimates of undiscounted future cash flows typically include (i) discrete financial forecasts, which rely on management’s estimates of revenue and operating expenses, (ii) long-term growth rates, and (iii) estimates of useful lives of the assets. Such estimates of future undiscounted cash flows are highly subjective and are based on numerous assumptions about future operations and market conditions.



	March 31,			December 31,
(In thousands)	2017			2016
Drilling rigs	$	1,457,907		$	1,463,199
Drilling rigs under Sale-Leaseback Transaction	469,747			469,018
Drilling machinery and equipment	348,164			345,172
Other	59,016			59,115
Property and equipment, at cost	2,334,834			2,336,504
Less: Accumulated depreciation	(1,516,497		)	(1,496,006		)
Less: Accumulated amortization under Sale-Leaseback Transaction	(32,531		)	(27,726		)
Property and equipment, net	$	785,806		$	812,772

~~For~~Depreciation expense was $31 million and $72 million for the three months ended March 31, 2017 and ~~nine~~2016, respectively, including depreciation expense of $1 million and $4 million for underwater inspection in lieu of drydocking costs (“UWILD”) for the three months ended ~~September~~March 3031, 2017 and 2016, werespectively. UWILD ~~did~~costs ~~not~~are ~~recognize~~capitalized anin ~~impairment~~“Other ~~loss~~assets” inon ~~our~~the Condensed Consolidated ~~Statements~~Balance ~~of Operations~~Sheet. ~~During~~Amortization of our leased drilling rigs under the ~~third~~Sale-Leaseback ~~quarter~~Transaction ofis ~~2015,~~recorded wein ~~identified~~depreciation ~~indicators~~expense offor ~~impairment~~the three months ended March 31, ~~including~~2017 ~~the~~and 2016.

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~~downward~~ ~~movement~~Our ofcapital ~~crude~~expenditures ~~oil~~totaled ~~prices,~~$3 ~~the~~million ~~release~~and of$18 ~~the~~million ~~Paragon~~for ~~DPDS2,~~ the ~~increased~~three ~~probability~~months ofended ~~lower~~March ~~activity~~31, in2017 ~~Brazil~~ and ~~Mexico~~2016, ~~and~~respectively. Included ~~the~~in ~~resultant~~accounts ~~projected~~payable ~~declines~~were in$1 ~~dayrates~~million and ~~utilization. As~~$5 amillion ~~result~~ of ~~these~~capital ~~indicators,~~accruals weas ~~concluded~~of ~~that~~March a31, ~~triggering~~2017 ~~event~~and ~~existed~~2016, ~~which required us to perform an impairment assessment of our fleet of drilling rigs~~respectively.

Based on this assessment and other operational analyses, we determined that five floaters, sixteen jackups, certain capital spares and the deposits related to the Three High-Spec Jackups Under Construction were impaired in 2015. In aggregate, we recognized non-cash impairment losses of approximately $1.1 billion during the three and nine months ended September 30, 2015, which is included in “Loss on ~~impairments” in our Condensed Consolidated Statements of Operations.~~Impairment

~~Goodwill~~We ~~Impairment~~assess the recoverability of our long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable (such as, but not limited to, cold stacking a rig, the expectation of cold stacking a rig in the near term, a decision to retire or scrap a rig, or excess spending over budget on a newbuild, construction project or major rig upgrade). For assets classified as held and used, we determine recoverability by evaluating the estimated undiscounted future net cash flows based on projected dayrates and utilization. For property and equipment whose carrying values are determined not to be recoverable, we calculate an impairment loss as a difference between the fair value and carrying amount. We estimate the fair values by applying either an income approach, using projected discounted cash flows, or a market approach. Estimates of discounted future cash flows typically include (i) discrete financial forecasts, which rely on management’s estimates of revenue and operating expenses, (ii) long-term growth rates, and (iii) estimates of useful lives of the assets. Such estimates of future discounted cash flows are highly subjective and are based on numerous assumptions about future operations and market conditions. In a market approach, the fair value would be based on unobservable third-party estimated prices that would be received in exchange for the assets in an orderly transaction between market participants.

AsFor ofthe ~~December~~three ~~31,~~months ~~2015~~ended ~~and~~March ~~September 30~~31, ~~2016~~2017, we ~~had~~recognized noan ~~goodwill~~impairment loss of $0.4 million in our Condensed Consolidated Statements of Operations. No impairment loss was recognized for the three months ended March 31, 2016.

For purposes of evaluating goodwill during the prior period, we have a single reporting unit, which represents our Contract Drilling Services provided by our fleet of mobile offshore drilling units. Given the events impacting the Company during the three months ended September 30, 2015, including the decrease in contractual activities, a sustained decline in the Company’s market capitalization and credit rating downgrades, the Company concluded that there were sufficient indicators to require a goodwill impairment analysis during the third quarter of 2015 in conjunction with our annual goodwill assessment. In accordance with the applicable accounting guidance, the Company performed a two-step impairment test.

Based on this analysis, the Company determined goodwill was impaired and recognized a non-cash impairment charge of approximately $37 million for the three and nine months ended September 30, 2015, which is included in “Loss on impairments” in our Condensed Consolidated Statements of Operations.

Gain on Sale of Assets

In January 2015, we completed the sale of the Paragon M822 for $24 million to an unrelated third party. In connection with the sale, we recorded a pre-tax gain of approximately $17 million.

In June 2015, we identified drill pipe that we would no longer utilize in our operations. We sold these items for $2 million and recorded a pre-tax loss of approximately $4 million.

NOTE 5—SHARE-BASED COMPENSATION

In conjunction with the Spin-Off, we adopted new equity incentive plans for our employees and directors, the Paragon Offshore plc 2014 Employee Omnibus Incentive Plan (the “Employee Plan”) and the Paragon Offshore plc 2014 Director Omnibus Plan (the “Director Plan”). ~~Replacement~~The Employee Plan and Director Plan include replacement awards of Paragon time-vested restricted stock units (“TVRSU’s”) and performance-vested restricted stock units (“PVRSU’s”), granted in connection with the Spin-Off, as well as, ~~since the Spin-off,~~ new share-settled and cash-settled awards (“CS-TVRSU’s”) which have been granted ~~under~~since ~~the Employee Plan and the Director Plan~~Spin-Off. No awards were granted during three ~~and nine~~ months ended ~~September~~March 3031, ~~2016~~2017.

Shares available for issuance and outstanding restricted stock units under our two equity incentive plans as of ~~September~~March 3031, ~~2016~~2017 are as follows (excluding the impact of cash-settled awards):

(In shares)	Employee Plan	Director Plan
Shares available for future awards or grants	45,~~745~~580,~~363~~201	434,048
Outstanding unvested restricted stock units	31,~~887~~461,~~027~~377	—

WeIn prior years, we have awarded both TVRSU’s and PVRSU’s under our Employee Plan and TVRSU’s under our Director Plan. The total compensation for TVRSU’s ~~under~~that ~~our~~ultimately ~~Employee~~vests ~~Plan~~is ~~generally~~recognized ~~vest~~using ~~pro~~a straight-~~rata~~line method over a three-year service period. The ~~number of PVRSU~~CS-TVRSU’s ~~which~~under ~~vest~~our ~~will~~Employee ~~depend~~Plan onare ~~the~~accounted ~~degree~~for ofas ~~achievement of specified company~~liability-based awards and ~~market-based~~are ~~performance~~valued ~~criteria~~at ~~over~~ the ~~service~~end of each reporting period~~. Under~~ ~~the~~at ~~Employee~~our ~~Plan,~~underlying weshare ~~have~~price. The ~~awarded~~total compensation for CS-TVRSU’s that ~~are~~ultimately ~~accounted~~vests ~~for~~is asrecognized ~~liability~~using a straight-~~based~~line ~~awards~~method over three-year service period. The ~~CS-TVRSU~~number of PVRSU’s which vest ~~pro~~under our Employee Plan will depend on the degree of achievement of specified company-~~rata~~based, ~~over~~return aon ~~three~~capital employed (“ROCE”), and market-~~year~~based, total shareholder return (“TSR”), performance criteria over the service period.

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A summary of restricted stock activity for the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017 is as follows:

	TVRSU’s Outstanding		TVRSU WeightedAverageGrant-DateFair Value		CS-TVRSU’s Outstanding		Share Price (1)		PVRSU’sOutstanding (2)		PVRSU WeightedAverageGrant-DateFair Value
Outstanding as of December 31, 2015	5,824,857		$	5.34	2,647,565				849,484		$	5.31
Outstanding as of December 31, 2016	1,910,893		$	5.31	1,292,601				602,219		$	5.39
Awarded	—		—		—				—		—
Vested	(842,282	)	5.18		(530,604	)			—		—
Vested	(2,481,499	)	5.13		(858,459	)			—		—
Forfeited (3)	(17,979	)	11.00		(250,190	)			(191,474	)	11.00
Forfeited	(235,543	)	5.70		(407,449	)			(70,272	)	11.00
Outstanding as of March 31, 2017	1,050,632		$	5.33	511,807		$	0.05	410,745		$	2.78
Outstanding as of September 30, 2016	3,107,815				1,381,657		$	0.62	779,212

(1) The share price represents the closing price of our shares on ~~September~~March 3031, ~~2016~~2017 at which our CS-TVRSU’s are measured.

(2) ~~Includes~~In ~~191,474 PVRSU’s outstanding as of September 30, 2016 for which vesting depends on~~ the ~~degree~~three of achievement of a company-based performance criteria, the Company’s ROCE. The share amount of these PVRSU’s equals the units that would vest if the “maximum” level of performance is achieved based on ROCE. The minimum number of units is zero and the “target” level of performance is 50% of the maximum. During the nine months ended ~~September~~March 3031, ~~2016~~2017, 70191,~~272~~474 PVRSU’s were forfeited as a result of the Company not achieving the thresholds for vesting based on annualized ROCE performance over the term of the awards. For the remaining ~~587~~410,~~738~~745 PVRSU’s outstanding, the share amount equals the units that would vest if the “target” level of performance is achieved based on the ~~Company’s~~degree of achievement of ~~a market-based objective,~~ the Company’s ~~total~~TSR, ~~shareholder~~relative ~~return~~to ~~(“TSR”)~~a peer group of companies. The minimum number of units is zero and the “maximum” level of performance is 200% of the target amount.

~~Equity~~(3) ~~and~~In ~~liability-based~~accordance ~~award~~with ~~amortization~~ASU ~~recognized during the three and nine months ended September 30, 2016 totaled $2 million and $8 million, respectively~~No. ~~Equity~~ ~~and liability~~2016-~~based award amortization recognized during the three and nine months ended September 30~~09, ~~2015~~Improvements ~~totaled~~to $3Employee ~~million~~Share-Based ~~and~~Payment ~~$13 million~~Accounting, ~~respectively. As~~the ofCompany ~~September 30,~~has ~~2016,~~elected ~~we had $8 million of total unrecognized compensation cost related~~ to ~~our~~account ~~TVRSU’s. The~~for ~~Company~~forfeitures ~~expects~~when tothey ~~recognize this cost over a remaining weighted-average period of 1~~occur.1 ~~years. As~~This ofelection ~~September 30, 2016, we~~ had ~~$0.6~~no ~~million~~impact ofon ~~total unrecognized compensation cost related to~~ our ~~CS-TVRSU’s. The~~financial ~~Company~~statements ~~expects~~for tothe ~~recognize~~three ~~this~~months ~~cost~~ended ~~over~~March a31, ~~remaining weighted-average period of 1~~2017.~~4 years.~~

Equity and liability-based award amortization recognized during the three months ended March 31, 2017 totaled $0.6 million. As of ~~September~~March 3031, ~~2016~~2017, we had $~~0.3~~2 million of total unrecognized compensation cost related to our ~~PVRSU~~TVRSU’s. The Company expects to recognize this cost over a remaining weighted-average period of ~~1 year~~0. ~~The~~7 ~~total~~years ~~potential~~or ~~compensation~~expense ~~for~~immediately ~~the 191,474 PVRSU’s based~~ on ~~ROCE is recognized over~~ the ~~service~~effective ~~period~~date ~~based on an estimate~~ of the ~~likelihood~~Consensual ~~that~~Plan. As ~~our~~of ~~ROCE~~March 31, ~~will~~2017, ~~achieve~~we ~~the~~had ~~targeted~~$21 ~~threshold. We~~thousand ~~currently~~of ~~estimate~~total aunrecognized ~~100%~~compensation ~~forfeiture~~cost ~~rate~~ related to ~~these~~our ~~PVRSU~~CS-TVRSU’s. The ~~total~~Company ~~potential~~expects ~~compensation~~to ~~for~~recognize ~~the~~this ~~587,738~~cost ~~PVRSU’s based on TSR is recognized~~ over ~~the~~a ~~service~~remaining weighted-average period ~~regardless~~ of ~~whether~~0.9 ~~the~~years ~~TSR~~or ~~performance~~expense ~~thresholds~~immediately ~~are~~on ~~ultimately~~the ~~achieved~~effective ~~since~~date ~~vesting~~of isthe ~~based~~Consensual ~~on market conditions~~Plan.

As of March 31, 2017, we had $0.1 million of total unrecognized compensation cost related to our PVRSU’s. The Company expects to recognize this cost over a remaining weighted-average period of 0.8 years or expense immediately on the effective date of the Consensual Plan. The total potential compensation for the 410,745 PVRSU’s based on TSR is recognized over the service period regardless of whether the TSR performance thresholds are ultimately achieved since vesting is based on market conditions.

NOTE 6—LOSS PER SHARE

~~Our~~On ~~outstanding~~August ~~share-based~~1, ~~payment~~2014, ~~awards~~approximately ~~currently~~85 ~~consist~~million ~~solely~~ of ~~restricted~~our ~~stock~~ordinary ~~units. These~~shares ~~unvested~~were ~~restricted~~distributed ~~stock~~to ~~units,~~Noble’s ~~which~~shareholders ~~contain~~in ~~non~~conjunction with the Spin-~~forfeitable~~Off. Weighted ~~rights~~average toshares ~~dividends~~outstanding, ~~are~~basic ~~deemed~~and todiluted, behave ~~participating~~been ~~securities~~computed ~~and~~based ~~are~~on ~~included~~the inweighted ~~the~~average ~~computation~~number of ~~earnings~~ordinary ~~per~~shares ~~share~~outstanding ~~pursuant~~during to the ~~“two-class”~~applicable ~~method~~period. ~~The~~Restricted ~~“two-class”~~stock ~~method~~units ~~allocates~~do ~~undistributed~~not ~~earnings~~represent ~~between~~ ordinary shares ~~and~~outstanding ~~participating~~until ~~securities;~~they ~~however, in a period of net loss, losses~~ are ~~not~~vested ~~allocated~~and toconverted ~~our~~into ~~participating~~ordinary ~~securities~~shares. NoOur ~~earnings~~outstanding ~~were allocated to unvested~~ share-based payment awards incurrently ~~our~~consist solely of restricted stock units. The diluted earnings per share calculation ~~for~~under the ~~three~~two ~~and~~class ~~nine~~method ~~months~~is ~~ended~~the ~~September~~same ~~30,~~as ~~2016~~our ~~and~~basic ~~2015~~earnings ~~due~~per toshare ~~our~~calculation ~~net~~as ~~loss~~we incurrently ~~each~~have ~~respective~~no ~~period~~stock options or other potentially dilutive securities outstanding.

~~Weighted~~Our ~~average~~unvested ~~shares~~restricted ~~outstanding~~stock units, ~~basic~~which ~~and~~contain ~~diluted~~non-forfeitable rights to dividends, ~~has~~are ~~been~~deemed ~~computed~~to ~~based~~be onparticipating ~~the~~securities ~~weighted~~and ~~average~~are ~~number~~included in the computation of ~~ordinary~~earnings ~~shares~~per ~~outstanding~~share ~~during~~pursuant to the ~~applicable~~“two-class” ~~periods~~method. ~~Restricted~~The ~~stock~~“two-class” ~~units~~method doallocates ~~not~~undistributed ~~represent~~earnings between ordinary shares ~~outstanding~~and ~~until~~participating ~~they~~securities; ~~are~~however, ~~vested~~in ~~and~~a ~~converted~~period ~~into~~of ~~ordinary~~net ~~shares. The~~loss, ~~diluted~~losses ~~earnings~~are ~~per~~not ~~share~~allocated ~~calculation~~to ~~under~~our ~~the~~participating ~~two~~securities. No ~~class~~earnings ~~method~~were isallocated ~~the~~to ~~same~~unvested asshare-based ~~our~~payment ~~basic~~awards in our earnings per share calculation asfor wethe ~~currently~~three ~~have~~months noended ~~stock~~March ~~options~~31, or2017 ~~other~~and ~~potentially~~2016 ~~dilutive~~due ~~securities~~to ~~outstanding~~our net losses in each respective period.

16Existing shareholders of the Company will not receive a recovery under the Consensual Plan.

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~~Upon~~The ~~our~~following ~~development~~table ofincludes athe ~~plan~~computation of ~~reorganization,~~basic ~~any~~and ~~issuance~~diluted ofnet ~~ordinary~~loss ~~shares~~and toloss ~~our~~per ~~creditors could dilute current equity interests.~~share:

The following table sets forth the computation of basic and diluted loss per share:



	Three Months Ended
	March 31,
(In thousands, except per share amounts)	2017			2016
Allocation of loss - basic and diluted
Net loss	$	(70,416	)	$	(5,210	)
Earnings allocated to unvested share-based payment awards	—			—
Net loss attributable to ordinary shareholders - basic and diluted	$	(70,416	)	$	(5,210	)

Weighted average shares outstanding
Basic and diluted	88,747			86,598

Weighted average unvested share-based payment awards	1,885			5,944

Loss per share
Basic and diluted	$	(0.79	)	$	(0.06	)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In thousands, except per share amounts)	2016			2015			2016			2015
Allocation of loss - basic and diluted
Net loss	$	(63,618	)	$	(1,084,838	)	$	(93,937	)	$	(976,380	)
Earnings allocated to unvested share-based payment awards	—			—			—			—
Net loss attributable to ordinary shareholders - basic and diluted	$	(63,618	)	$	(1,084,838	)	$	(93,937	)	$	(976,380	)
Weighted average shares outstanding
Basic and diluted	87,876			87,077			87,360			85,703
Weighted average unvested share-based payment awards	3,929			6,947			4,731			6,023
Loss per share
Basic and diluted	$	(0.72	)	$	(12.46	)	$	(1.08	)	$	(11.39	)

NOTE 7—DEBT

A summary of long-term debt as of ~~September~~March 3031, ~~2016~~2017 and December 31, ~~2015~~2016 is as follows:

	September 30,			December 31,
	March 31,			December 31,
(In thousands)	~~2016~~2017			~~2015~~2016
Revolving Credit Facility (1)	$	—		$	~~708,500~~—
Term Loan Facility, bearing interest of 5.25% and 3.75% as of September 30, 2016 and December 31, 2015, respectively(1)	—			641,875
Term Loan Facility, bearing interest of 5.75% and 5.5% as of March 31, 2017 and December 31, 2016, respectively(1)	—			—
Senior Notes due 2022, bearing fixed interest at 6.75% per annum(1)	—			~~456,572~~—
Senior Notes due 2024, bearing fixed interest at 7.25% per annum(1)	—			~~527,010~~—
Sale-Leaseback Transaction	~~209~~185,~~926~~691			~~268~~196,~~688~~418
Unamortized debt issuance costs	(~~767~~667		)	(~~23,572~~718		)
Total debt	~~209~~185,~~159~~024			2195,~~579,073~~700
Less: Current maturities of long-term debt	(3029,~~659~~694		)	(4029,~~629~~737		)
Long-term debt	$	~~178~~155,~~500~~330		$	2165,~~538,444~~963

(1) See Note 8 - “Liabilities Subject to Compromise” for each of the respective ~~September~~March 3031, ~~2016~~2017 balances identified above. The commencement of the Bankruptcy cases on February 14, 2016 constituted an event of default that accelerated our obligations under the Term Loan Agreement, Revolving Credit Agreement, and Senior Notes. Any efforts to enforce payments related to these obligations are automatically stayed as a result of the filing of the petitions and are subject to the applicable provisions of the Bankruptcy Code.

Revolving Credit Facility, Term Loan Facility and Senior Notes

On June 17, 2014, we entered into the Revolving Credit Agreement with lenders that provided commitments in the amount of $800 million. The Revolving Credit Agreement, which is secured by substantially all of our rigs, has a term of five years and matures in July 2019. Borrowings under the Revolving Credit Facility bear interest, at our option, at either (i) an adjusted LIBOR, plus an applicable margin ranging between 1.50% to 2.50%, depending on our leverage ratio, or (ii) a base rate plus an applicable margin ranging between 1.50% to 2.50%. Under the Revolving Credit Agreement, we may also obtain letters of credit, the issuance of which would reduce a corresponding amount available for borrowing.

1719

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As of ~~September~~March 3031, ~~2016~~2017, we had $709 million in borrowings outstanding at a weighted-average interest rate of 3.0348%, and an aggregate amount of $8769 million of letters of credit issued under the Revolving Credit Facility. The balance of our Revolving Credit Facility and unamortized deferred debt issuance costs are classified as liabilities subject to compromise ~~(See Note 8 - “Liabilities Subject to Compromise”)~~. We continue to pay interest on the Revolving Credit Facility in the ordinary course of business based on Bankruptcy Court approval. Accordingly, interest payable on the Revolving Credit Facility is not classified as a liability subject to compromise.

On July 18, 2014, we issued $1.08 billion of Senior Notes and also borrowed $650 million under the Term Loan Facility. The Term Loan Facility is secured by substantially all of our rigs. The proceeds from the Term Loan Facility and the Senior Notes were used to repay $1.7 billion of intercompany indebtedness to Noble incurred as partial consideration for the Separation.

The Senior Notes consisted of $500 million of 6.75% senior notes and $580 million of 7.25% senior notes, which mature on July 15, 2022 and August 15, 2024, respectively. The Senior Notes were issued without an original issue discount. Contractual interest on the 6.75% senior notes is payable semi-annually, in January and July. Contractual interest on the 7.25% senior notes is payable semi-annually, in February and August. The approximate $1 billion balance of our Senior Notes, accrued pre-petition interest, and unamortized deferred debt issuance costs are classified as liabilities subject to compromise ~~(See Note 8 - “Liabilities Subject to Compromise”)~~. As interest on the Company’s unsecured Senior Notes subsequent to February 14, 2016 was not expected to be an allowed claim, the Company ceased accruing interest on its Senior Notes on this date. Results for the three ~~and nine~~ months ended ~~September~~March 3031, 2017 and 2016 would have included contractual interest expense of $18 million and $449 million, respectively. These costs would have been incurred had the unsecured Senior Notes not been classified as subject to compromise.

Borrowings under the Term Loan Facility bear interest at an adjusted LIBOR rate plus 2.75%, subject to a minimum LIBOR rate of 1% or a base rate plus 1.75%, at our option. We are required to make quarterly principal payments of $1.6 million plus interest and may prepay all or a portion of the Term Loan Facility at any time. The Term Loan Facility matures in July 2021. The loans under the Term Loan Facility were issued with 0.50% original issue discount. As ~~a result~~ of ~~the oral ruling which denied confirmation of the Debtors’ Amended Plan including the reinstatement of the Term Loan Facility~~March 31, ~~our Term Loan Facility may be affected by a plan of reorganization. Consequently~~2017, asthe ofapproximate ~~September~~$635 ~~30,~~million ~~2016, the net~~ balance of our Term Loan Facility, unamortized deferred debt issuance costs and unamortized discount ~~was~~are classified as liabilities subject to compromise (See Note 8 - “Liabilities Subject to Compromise”). Paragon continues to make interest payments on its Term Loan Facility in the ordinary course of business, based on Bankruptcy Court approval. Accordingly, interest payable on the Term Loan Facility is not classified as liabilities subject to compromise in the Condensed Consolidated Balance Sheet as of ~~September~~March 3031, ~~2016~~2017.

During the first quarter of 2015, we repurchased and canceled an aggregate principal amount of $11 million of our Senior Notes at an aggregate cost of $7 million, including accrued interest. The repurchases consisted of $1 million aggregate principal amount of our 6.75% senior notes due July 2022 and $10 million aggregate principal amount of our 7.25% senior notes due August 2024. As a result of the repurchases, we recognized a total gain on debt retirement, net of the write-off of issuance costs, of approximately $4 million in “Gain on repurchase of long-term debt.” All Senior Note repurchases were made using available cash balances. We had no debt repurchases subsequent to the first quarter of 2015.

The agreements related to our Debt Facilities contain covenants that place restrictions on certain merger and consolidation transactions; our ability to sell or transfer certain assets; payment of dividends; making distributions; redemption of stock; incurrence or guarantee of debt; issuance of loans; prepayment; redemption of certain debt; as well as incurrence or assumption of certain liens. The covenants and events of default under our Revolving Credit Agreement, Senior Notes, and Term Loan Facility are substantially similar.

Sale-Leaseback Transaction

On July 24, 2015, we executed a combined $300 million Sale-Leaseback Transaction with subsidiaries of SinoEnergy (collectively, the “Lessors”) for our two high specification jackup units, Prospector 1 and Prospector 5 (collectively, the “Prospector Rigs”). We sold the Prospector Rigs to the Lessors and immediately leased the Prospector Rigs from the Lessors for a period of five years pursuant to a lease agreement for each Prospector Rig (collectively, the “Lease Agreements”). Net of fees and expenses and certain lease prepayments, we received net proceeds of approximately $292 million, including amounts used to fund certain required reserve accounts. The Prospector 5 is currently operating under drilling contracts with Total S.A. until November 2017. The Prospector 1 ~~ended~~is ~~its~~currently ~~contract~~operating under drilling contracts with ~~Total~~Oranje-Nassau SEnergie B.AV. inuntil ~~mid-September~~June ~~2016~~2018.

OnThe ~~April 5, 2016, the~~ Company has obtained a forbearance from the Lessors of the event of default relating to the filing of the chapter 11 cases under the Lease Agreements. ~~The~~We are currently in discussions with the Lessor to ensure the forbearance will become a permanent waiver of this event of default upon the occurrence of certain conditions, including that the effective date of the Consensual Plan occurs by ~~the~~August ~~outside~~1, ~~date~~2017. If ~~set~~we ~~forth~~are inunable ~~the~~to ~~PSA. We~~satisfy ~~have~~the ~~extended~~conditions of this ~~forbearance~~waiver, sowe ~~that~~intend ~~the~~to ~~forbearance~~file ~~will~~petitions ~~continue~~for ~~until~~relief ~~November~~under ~~30,~~chapter ~~2016,~~11 ~~subject~~of the Bankruptcy Code for the parties to the Lease Agreements and certain of their affiliates.

18While it has been determined that the Lessors are variable interest entities (“VIEs”), we are not the primary beneficiary of the VIEs for accounting purposes since we do not have the power to direct the operation of the VIEs and we did not have the obligation to absorb losses nor the right to receive benefits that could potentially be significant to the VIEs. As a result, we did not consolidate the Lessors in our consolidated financial statements. We have accounted for the Sale-Leaseback Transaction as a capital lease.

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~~conditions,~~The ~~including~~following ~~that~~table ~~the~~includes ~~PSA~~our istotal ~~not~~minimum ~~terminated~~annual ~~before~~rental ~~such~~payments ~~date. In~~using ~~light~~weighted-average ofeffective ~~the~~interest ~~Bankruptcy~~rates ~~Court’s oral order on October 28, 2016, we are discussing modifications to the conditions~~ of ~~the~~5.2% ~~waiver~~for ~~with~~ the ~~Lessor~~Prospector if1 ~~the~~and ~~Debtors elect to pursue an alternative plan of reorganization~~7. If5% ~~we do not receive this waiver, we intend to file petitions~~ for ~~relief under chapter 11 of~~ the ~~Bankruptcy~~Prospector ~~Code for the parties to the Lease Agreements and certain of their affiliates~~5.

While it has been determined that the Lessors are variable interest entities (“VIEs”), we are not the primary beneficiary of the VIEs for accounting purposes since we do not have the power to direct the operation of the VIEs and we do not have the obligation to absorb losses nor the right to receive benefits that could potentially be significant to the VIEs. As a result, we do not consolidate the Lessors in our consolidated financial statements. We have accounted for the Sale-Leaseback Transaction as a capital lease.



(In millions)	2017		2018		2019		2020		Thereafter		Total
Minimum annual rental payments	$	34	$	32	$	31	$	119	$	—	$	216

~~The~~We ~~following~~made ~~table~~rental ~~includes~~payments, ~~our~~including ~~minimum~~interest, ~~annual~~of ~~rental~~approximately ~~payments~~$13 ~~using~~million ~~weighted~~and $21 million during the three months ended March 31, 2017 and 2016, respectively. This includes pre-~~average~~payments ~~effective~~or ~~interest~~Excess ~~rates~~Cash Amounts (as defined below) of ~~5.2%~~$3 million for the Prospector 1 for both the three months ended March 31, 2017 and 7.2016 and $3 million and $5% million for the Prospector 5 for the three months ended March 31, 2017 and 2016, respectively.

(In millions)		2016				2017				2018				2019				2020				Thereafter				Total
Minimum annual rental payments		$	12			$	41			$	33			$	31			$	133			$	—			$	250

Following the third and fourth anniversaries of the closing dates of the Lease Agreements, we have the option to repurchase each Prospector Rig for an amount as defined in the Lease Agreements. At the end of the lease term, we have an obligation to repurchase each Prospector Rig for a maximum amount of $88 million per rig, less any pre-payments made by us during the term of the Lease Agreements.

WeThe ~~made~~Lease ~~rental~~Agreements obligate us to make certain termination payments upon the occurrence of certain events of default, including ~~interest~~payment defaults, breaches of ~~approximately~~representations ~~$24 million~~ and ~~$71~~warranties, ~~million~~termination ~~during~~of the ~~three~~underlying ~~and~~drilling ~~nine~~contract ~~months~~for ~~ended~~each ~~September 30~~rig, ~~2016. We~~covenant ~~made~~defaults, ~~rental~~cross-payment ~~payments~~defaults, ~~including~~certain ~~interest,~~events of ~~approximately~~bankruptcy, ~~$13~~material ~~million~~judgments ~~during~~and ~~the~~actual ~~three~~or ~~and~~asserted ~~nine~~failure ~~months~~of ~~ended~~any ~~September~~credit ~~30,~~document ~~2015~~to be in force and effect. ~~This~~The ~~includes~~Lease ~~pre-payments~~Agreements orcontain ~~Excess~~certain ~~Cash~~representations, ~~Amounts~~warranties, ~~(as~~obligations, ~~defined~~conditions, ~~below)~~indemnification ofprovisions $4and ~~million~~termination provisions customary for sale and ~~$11~~leaseback ~~million~~financing ~~for~~transactions. ~~the~~The ~~Prospector~~Lease 1Agreements ~~for~~contain ~~the~~certain ~~three~~affirmative and ~~nine~~negative ~~months~~covenants ~~ended~~that, ~~September~~subject 30to exceptions, ~~2016~~limit our ability to, ~~respectively~~among other things, ~~and~~incur $7additional ~~million~~indebtedness and ~~$21~~guarantee ~~million~~indebtedness, ~~for~~pay ~~the~~inter-company ~~Prospector~~dividends 5or ~~for~~make ~~the~~other ~~three~~inter-company distributions or repurchase or redeem capital stock, prepay, redeem or repurchase certain debt, make loans and ~~nine~~investments, ~~months~~sell, ~~ended~~transfer ~~September~~or 30otherwise dispose of certain assets, ~~2016~~create or incur liens, ~~respectively~~enter into certain types of transactions with affiliates, consolidate, merge or sell all or substantially all of our assets, and enter into new lines of business.

~~Following~~In ~~the~~addition, ~~third~~we ~~and~~are ~~fourth~~required ~~anniversaries~~to maintain a cash reserve of ~~the~~$11.5 ~~closing~~million ~~dates~~for each Prospector Rig throughout the term of the Lease Agreements,. weDuring ~~have~~the term of the ~~option~~current todrilling ~~repurchase~~contract for each Prospector Rig, we are also required to pay to the Lessors any excess cash amounts earned under such contract, after payment of bareboat charter fees and operating expenses for ansuch ~~amount~~Prospector asRig ~~defined~~and inmaintenance of any mandatory reserve cash amounts (the ~~Lease~~“Excess ~~Agreements~~Cash Amounts”). AtThese excess cash payments represent prepayment for the ~~end~~remaining ofrental payments under the ~~lease~~applicable ~~term~~Lease Agreement (the “Cash Sweep”). As of March 31, 2017 and December 31, 2016, we ~~have~~had anshort-term ~~obligation~~restricted tocash ~~repurchase~~balances ~~each~~of ~~Prospector~~$11 ~~Rig~~million ~~for~~and a$9 ~~maximum~~million, ~~amount~~respectively, and long-term restricted cash balances of $8827 million ~~per~~and ~~Prospector~~$29 million, respectively, related to the Lease Agreements in “Restricted cash” on our Condensed Consolidated Balance Sheet. Following the conclusion of the current drilling contract for each Rig, ~~less~~the ~~any~~Cash ~~pre-payments~~Sweep ~~made~~will bybe reduced, requiring us ~~during~~to make prepayments to the ~~term~~Lessors of up to 25% of the ~~Lease~~Excess ~~Agreements~~Cash Amounts.

The Lease Agreements obligate us to make certain termination payments upon the occurrence of certain events of default, including payment defaults, breaches of representations and warranties, termination of the underlying drilling contract for each Rig, covenant defaults, cross-payment defaults, certain events of bankruptcy, material judgments and actual or asserted failure of any credit document to be in force and effect. The Lease Agreements contain certain representations, warranties, obligations, conditions, indemnification provisions and termination provisions customary for sale and leaseback financing transactions. The Lease Agreements contain certain affirmative and negative covenants that, subject to exceptions, limit our ability to, among other things, incur additional indebtedness and guarantee indebtedness, pay inter-company dividends or make other inter-company distributions or repurchase or redeem capital stock, prepay, redeem or repurchase certain debt, make loans and investments, sell, transfer or otherwise dispose of certain assets, create or incur liens, enter into certain types of transactions with affiliates, consolidate, merge or sell all or substantially all of our assets, and enter into new lines of business.

In addition, we are required to maintain a cash reserve of $11.5 million for each Prospector Rig throughout the term of the Lease Agreements. During the term of the current drilling contract for each Prospector Rig, we are also required to pay to the Lessors any excess cash amounts earned under such contract, after payment of bareboat charter fees and operating expenses for such Prospector Rig and maintenance of any mandatory reserve cash amounts (the “Excess Cash Amounts”). These excess cash payments represent prepayment for the remaining rental payments under the applicable Lease Agreement (the “Cash Sweep”). As of September 30, 2016 and December 31, 2015, we had short-term restricted cash balances of $8 million and $3 million, respectively, and long-term restricted cash balances $27 million and $25 million, respectively, related to the Lease Agreements in “Restricted cash” on our Condensed Consolidated Balance Sheet. Following the conclusion of the current drilling contract for each Rig, the Cash Sweep will be reduced, requiring us to make prepayments to the Lessors of up to 25% of the Excess Cash Amounts.

NOTE 8—LIABILITIES SUBJECT TO COMPROMISE

As a result of the filing of the Bankruptcy cases on February 14, 2016, we have classified pre-petition liabilities that ~~may~~are benot ~~affected~~fully bysecured and that have at least a ~~plan~~possibility of ~~reorganization~~not being repaid at the full claim amount by the Consensual Plan as liabilities subject to compromise in our ~~interim~~condensed consolidated financial statements. Pre-petition liabilities that are subject to compromise are required to be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. If there is uncertainty about whether a secured claim is under-secured, or ~~will~~would be impaired under athe ~~plan~~Consensual ~~of reorganization~~Plan, the entire amount of the claim is included in liabilities subject to compromise. The amounts currently classified as liabilities subject to compromise represent Paragon’s current estimate of claims expected to be allowed under the Consensual Plan, if approved. We will continue to evaluate these liabilities during the pendency of the Bankruptcy cases and they may be subject to future adjustments depending on the Bankruptcy Court actions, further development with respect to disputed claims, or other events. Such adjustments may be material.

19The Revolving Credit Facility, Senior Notes, and Term Loan Facility will be affected by the Consensual Plan which is subject to confirmation by the Bankruptcy Court. As such, the outstanding balances of these debt instruments and related accrued pre-petition interest (for the Senior Notes only), unamortized debt issuance costs and unamortized discount (for Term Loan Facility only) have been classified as liabilities subject to compromise in the Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016.

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~~currently~~Generally, ~~classified~~actions asto enforce or otherwise effect payment of pre-bankruptcy filing liabilities ~~subject~~are tostayed. Although ~~compromise~~payment ~~represent~~of ~~Paragon~~pre-petition claims is generally not permitted, the Bankruptcy Court approved the Debtors’s ~~current~~“first ~~estimate~~day” motions allowing, among other things, the payment of ~~claims~~obligations ~~expected~~related to behuman ~~allowed~~capital, ~~under~~supplier arelations, ~~plan~~customer relations, business operations, tax matters, cash management, utilities, case management and retention of ~~reorganization~~professionals. WeAs ~~will~~a ~~continue~~result of this approval, the Company continues to ~~evaluate~~pay ~~these~~certain ~~liabilities~~pre-petition ~~during~~claims ~~the~~in ~~pendency~~designated ofcategories and subject to certain terms and conditions in the ~~Bankruptcy~~ordinary ~~cases~~course of business, and ~~they~~we ~~may~~have benot classified these liabilities as subject to ~~future~~compromise ~~adjustments~~in ~~depending~~the onCondensed ~~the~~Consolidated ~~Bankruptcy~~Balance ~~Court~~Sheets ~~actions~~as of March 31, ~~further~~2017 ~~development~~and ~~with~~December 31, 2016. This is designed to preserve the value of the Company’s businesses and assets. With respect to ~~disputed~~pre-petition claims, orthe ~~other~~Company ~~events. Such~~notified ~~adjustments~~all ~~may~~known beclaimants ~~material~~of the deadline to file a proof of claim with the Court.

The Revolving Credit Facility, Senior Notes, and Term Loan Facility may be affected by a plan of reorganization which is subject to confirmation by the Bankruptcy Court. As such, the outstanding balances of these debt instruments and related accrued pre-petition interest (for the Senior Notes only), unamortized debt issuance costs and unamortized discount (for Term Loan Facility only) have been classified as liabilities subject to compromise in the Condensed Consolidated Balance Sheet as of September 30, 2016.

Generally, actions to enforce or otherwise effect payment of pre-bankruptcy filing liabilities are stayed. Although payment of pre-petition claims is generally not permitted, the Bankruptcy Court approved the Debtors’ “first day” motions allowing, among other things, the payment of obligations related to human capital, supplier relations, customer relations, business operations, tax matters, cash management, utilities, case management and retention of professionals. As a result of this approval, the Company continues to pay certain pre-petition claims in designated categories and subject to certain terms and conditions in the ordinary course of business, and we have not classified these liabilities as subject to compromise in the Condensed Consolidated Balance Sheet as of September 30, 2016. This is designed to preserve the value of the Company’s businesses and assets. With respect to pre-petition claims, the Company has notified all known claimants of the deadline to file a proof of claim with the Court.

The Company has been paying and intends to continue to pay undisputed post-petition claims in the ordinary course of business.

The following table reflects pre-petition liabilities that are subject to compromise included in our Condensed Consolidated Balance Sheets as of ~~September~~March 3031, 2017 and December 31, 2016. See Note 7 - “Debt” for a specific discussion on the debt instruments and related balances subject to compromise:

	September 30,
	March 31,			December 31,
(In thousands)	~~2016~~2017			2016
Revolving Credit Facility	$	~~708~~709,~~500~~100		$	709,100
Term Loan Facility	641,875			641,875
Senior Notes due 2022, bearing fixed interest at 6.75% per annum	456,572			456,572
Senior Notes due 2024, bearing fixed interest at 7.25% per annum	527,010			527,010
Interest payable on Senior Notes	37,168			37,168
Debt issuance costs on Revolving Credit Facility	(5,891		)	(5,891		)
Discount and debt issuance costs on Term Loan Facility	(7,259		)	(7,259		)
Debt issuance costs on Senior Notes	(14,012		)	(14,012		)
Liabilities subject to compromise	$	2,~~343~~344,~~963~~563		$	2,344,563

NOTE 9—REORGANIZATION ITEMS

ASC 852 requires that transactions and events directly associated with the reorganization be distinguished from the ongoing operations of the business. The Company uses “Reorganization items, net” on its Condensed Consolidated Statements of Operations to reflect the net revenues, expenses, gains and losses that are the direct result of the reorganization of the business. The following table summarizes the components included in “Reorganization items, net”:



	Three Months Ended
	March 31,
(In thousands)	2017		2016
Professional fees	$	16,448	$	18,616
Other	2,026		3,226
Total Reorganization items, net	$	18,474	$	21,842

Included in Reorganization items, net for the three months ended March 31, 2017 is approximately $10 million of cash paid for professional fees and $8 million of accrued expenses.

Included in Reorganization items, net for the three months ended March 31, 2016 is approximately $13 million of cash paid for professional fees, $6 million of accrued expenses and $3 million of non-cash amortization associated with the reorganization.

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	Three Months Ended		Nine Months Ended
	September 30,		September 30,
(In thousands)	2016		2016
Professional fees	$	14,249	$	46,747
Other	2,962		9,855
Total Reorganization items, net	$	17,211	$	56,602

Included in Reorganization items, net for the nine months ended September 30, 2016, is approximately $31 million of cash paid for professional fees, $18 million of accrued expenses and $8 million of non-cash amortization associated with the reorganization.

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NOTE 10—CONDENSED COMBINED DEBTOR-IN-POSSESSION FINANCIAL INFORMATION

The financial statements below represent the condensed combined financial statements of the Debtors. Effective January 1, 2016, the Non-Filing entities are accounted for as non-consolidated subsidiaries in these financial statements and, as such, their net earnings are included as “Equity in earnings of Non-Filing entities, net of tax” in the Debtors’ Condensed Combined Statement of Operations and their net assets are included as “Investment in Non-Filing entities” in the Debtors’ Condensed Combined Balance Sheet.

Intercompany transactions among the Debtors have been eliminated in the financial statements contained herein. Intercompany transactions among the Debtors and the Non-Filing entities have not been eliminated in the Debtors’ financial statements.

DEBTORS’ CONDENSED COMBINED STATEMENT OF OPERATIONS

(Unaudited)

(In thousands)

	Three Months Ended			~~Nine Months Ended~~
	September 30, 2016			September 30, 2016
	March 31,
	2017			2016
Operating revenues
Contract drilling services	$	8527,~~594~~910		$	~~417~~200,~~259~~322
Reimbursables and other	83,~~009~~039			3817,~~866~~098
	93,603			456,125
	30,949			217,420
Operating costs and expenses
Contract drilling services	8242,~~802~~687			~~270~~104,~~407~~428
Reimbursables	~~1,387~~810			2512,~~987~~568
Depreciation and amortization	4424,~~445~~792			~~164~~66,~~247~~075
General and administrative	118,~~110~~099			2910,~~783~~472
	139,744			490,424
Loss on impairments	391			—
Operating loss before interest, reorganization items and income taxes	(46,141		)	(34,299		)
	76,779			193,543
Interest expense, net (contractual interest of $33,011 and $95,782 for the three and nine months ended September 30, 2016)	(14,429		)	(50,771		)
Operating loss before interest, reorganization items and income taxes	(45,830		)	23,877
Other, net	2,408			1,325
Interest expense, net (contractual interest of $33,131 and $31,207 for the three months ended March 31, 2017 and 2016)	(14,966		)	(22,118		)
Reorganization items, net	(15,046		)	(49,253		)
Other, net	1,251			794
Loss before income taxes	(73,208		)	(132,998		)
Reorganization items, net	(18,474		)	(19,454		)
Income tax provision	(1,912		)	(2,372		)
Loss before income taxes	(78,019		)	(16,901		)
Net loss	(75,120		)	(135,370		)
Income tax provision	(2,222		)	(1,183		)
Equity in earnings of Non-Filing entities, net of tax	11,502			41,433
Net loss	(80,241		)	(18,084		)
Net loss attributable to Paragon Offshore plc	$	(63,618	)	$	(93,937	)
Equity in earnings of Non-Filing entities, net of tax	9,825			12,874
Net loss attributable to Paragon	$	(70,416	)	$	(5,210	)

2223

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DEBTORS’ CONDENSED COMBINED BALANCE SHEET

(Unaudited)

(In thousands)

	September 30,
	March 31,			December 31,
	2016
	2017			2016
ASSETS
Current assets
Cash and cash equivalents	$	~~566~~497,~~998~~488		$	553,238
Accounts receivable, net of allowance for doubtful accounts of $33 million	114,222
Accounts receivable, net of allowance for doubtful accounts of $25 million at March 31, 2017 and December 31, 2016, respectively	32,942			48,861
Accounts receivable from Non-Filing entities	~~486~~723,~~932~~010			647,657
Prepaid and other current assets	3537,~~343~~808			33,228
Total current assets	1,~~203~~291,~~495~~248			1,282,984
Investment in Non-Filing entities	1,~~086~~057,~~836~~476			1,074,335
Notes receivable from Non-Filing entities	5763,~~238~~671			58,759
Property and equipment, at cost	21,~~154~~798,~~078~~997			1,809,120
Accumulated depreciation	(1,~~677~~499,~~888~~594		)	(1,481,209		)
Property and equipment, net	~~476~~299,~~190~~403			327,911
Other assets	4024,~~987~~283			25,974
Total assets	$	2,~~864~~736,~~746~~081		$	2,769,963
LIABILITIES AND EQUITY
Current liabilities
Current maturities of debt due to Non-Filing entities	$	3,606		$	3,606
Accounts payable	4024,~~965~~456			32,261
Accounts payable due to Non-Filing entities	~~778~~1,~~456~~019,635			941,644
Accrued payroll and related costs	2622,~~200~~002			24,591
Taxes payable	1312,~~135~~734			13,418
Interest payable	~~2,058~~284			591
Other current liabilities	2515,~~600~~088			15,993
Total current liabilities	~~890~~1,~~020~~097,805			1,032,104
Long-term debt due to Non-Filing entities	52,~~640~~112			2,112
Deferred income taxes	1,~~350~~331			2,505
Other liabilities	2623,~~406~~579			24,758
Liabilities subject to compromise	2,~~343~~344,~~963~~563			2,344,563
Total liabilities	3,~~267~~469,~~379~~390			3,406,042
Equity
Total deficit	(~~402~~733,~~633~~309		)	(636,079		)
Total liabilities and equity	$	2,~~864~~736,~~746~~081		$	2,769,963

2324

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DEBTORS’ CONDENSED COMBINED STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended
	Three Months Ended
	September 30, 2016
	March 31,
Net cash provided by operating activities	$	148,301
	2017			2016
Capital expenditures	(30,817		)
Net cash provided by (used in) operating activities	$	(53,539	)	$	74,940
Change in accrued capital expenditures	(8,149		)
Capital expenditures	(1,780		)	(15,884		)
Change in restricted cash	(9,254		)
Change in accrued capital expenditures	(406		)	(5,072		)
Net cash used in investing activities	(482,~~220~~186		)	(20,956		)
Net cash used in financing activities	—(25		)	—
Net change in cash and cash equivalents	~~100~~(55,~~081~~750		)	53,984
Cash and cash equivalents, beginning of period	~~466~~553,~~917~~238			466,917
Cash and cash equivalents, end of period	$	~~566~~497,~~998~~488		$	520,901

NOTE 11 —INCOME TAXES

We operate through various subsidiaries in numerous countries throughout the world. Consequently, income taxes have been based on the laws and rates in effect in the countries in which operations are conducted and in which we and our subsidiaries or our Predecessor and its subsidiaries were incorporated or otherwise considered to have a taxable presence. The change in the effective tax rate from period to period is primarily attributable to changes in the profitability or loss mix of our operations in various jurisdictions. As our operations continually change among numerous jurisdictions, and methods of taxation in these jurisdictions vary greatly, there is little direct correlation between the income tax provision or benefit and income or loss before taxes.

The income tax provision was $12 million ~~for both the three~~ and ~~nine~~$1 ~~months~~million ~~ended September 30, 2016. The income tax benefit~~ for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2015~~2017 ~~was $55 million~~ and ~~$67 million~~2016, respectively.

At ~~September~~March 3031, ~~2016~~2017, the liabilities related to our unrecognized tax benefits, including estimated accrued interest and penalties, totaled $1920 million, and if recognized, would reduce our income tax provision by $1920 million. At December 31, ~~2015~~2016, the liabilities related to our unrecognized tax benefits totaled $19 million. It is reasonably possible that our existing liabilities related to our unrecognized tax benefits may increase or decrease in the next twelve months primarily due to the progression of open audits or the expiration of statutes of limitation. However, we cannot reasonably estimate a range of potential changes in our existing liabilities for unrecognized tax benefits due to various uncertainties, such as the unresolved nature of various audits.

NOTE 12—~~EMPLOYEE~~RESTRUCTURING ~~BENEFIT PLANS~~CHARGES

During 2016 and 2017, the Company initiated a workforce reduction program to align the size and composition of Paragon’s workforce with the Company’s expected future operating and capital plans and the Company’s strategy to focus on fewer markets and utilize a smaller fleet. The workforce reduction program was in response to the lack of significant improvement in the drilling market coupled with the Company’s decision to exit operations in certain markets, such as Brazil and Canada. Our management and board of directors approved a workforce reduction across our offshore crews, onshore bases and corporate office.

As related to the workforce reduction for the period ending March 31, 2017, appropriate communications to impacted personnel had been completed. As a result, we recorded restructuring expense of $3 million consisting of employee severance and other termination benefits which were included in “Contract drilling services”, “Labor contract drilling services” and “General and administrative” operating costs and expenses on our Consolidated Statement of Operations for the three months ended March 31, 2017. We paid approximately $4 million in restructuring and employee separation related costs during 2017. We had $6

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million and $10 million of accrued restructuring expense consisting of employee severance and other termination benefits in “Accrued payroll and related costs” on our Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016, respectively. We expect $2 million of restructuring expense related to the workforce reduction program to be recognized in “Contract drilling services”, “Labor contract drilling services” and “General and administrative” operating costs and expenses during the remainder of 2017.

NOTE 13—EMPLOYEE BENEFIT PLANS

Defined Benefit Plans

We sponsor two non-U.S. noncontributory defined benefit pension plans, the Paragon Offshore Enterprise Ltd and the Paragon Offshore Nederland B.V. pension plans, which cover certain Europe-based salaried, non-union employees.

~~For~~As ~~the~~of ~~three~~January ~~and~~1, ~~nine~~2017, ~~months~~all ~~ended~~active ~~September~~employees ~~30,~~under ~~2016~~our ~~pension~~current defined benefit ~~expense~~pension plans were transferred to a defined contribution pension plan as related to ~~our~~their future service. The accrued benefits under the defined benefit ~~pension~~plan were frozen and all employees of those plans, ~~based~~became ondeferred ~~actuary~~members. The ~~estimates,~~transfer ~~are~~to ~~presented~~a indefined contribution pension plan was accounted for as a curtailment during the ~~table~~year ~~below~~ended December 31, 2016.

24For the three months ended March 31, 2017 pension benefit expense related to our frozen defined benefit pension plans, based on actuary estimates, are presented in the table below.

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Pension cost includes the following components:

Three Months Ended

~~Nine Months Ended~~

September 30,

March 31,

(In thousands)

~~2016~~2017

~~2015~~2016

~~2016~~

~~2015~~

Service cost

~~1,163~~18

1,~~361~~174

~~3,452~~

~~4,097~~

Interest cost

~~575~~471

~~493~~580

~~1,706~~

~~1,484~~

Expected return on plan assets

(~~460~~367

)

(~~449~~465

)

~~(1,366~~

)

~~(1,352~~

)

Amortization of prior service cost

(5—

)

~~(14~~

)

~~(15~~

)

Amortization of net actuarial loss

~~193~~10

195

~~573~~

~~579~~

Net pension expense

~~1,466~~132

1,~~595~~479

~~4,351~~

~~4,793~~

During the three ~~and nine~~ months ended ~~September~~March 3031, 2017 and 2016, we ~~contributed~~made ~~approximately~~no $6contribution ~~million~~ to our frozen defined benefit pension plans.

Defined Contribution and Other Benefit Plans

We sponsor a 401(k) defined contribution plan and a profit sharing plan~~, which cover our employees who are not otherwise enrolled in the above defined benefit plans~~. Other post-retirement benefit expense related to these other benefit plans included in the accompanying Condensed Consolidated Statements of Operations was $0.7 million and $0.63 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017 and ~~2015~~2016, respectively.

NOTE 1314—DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We have historically entered into derivative instruments to manage our exposure to fluctuations in foreign currency exchange rates, and we may conduct hedging activities in future periods to mitigate such exposure. We have documented policies and procedures to monitor and control the use of derivative instruments. We do not engage in derivative transactions for speculative or trading purposes, nor are we a party to leveraged derivatives.

~~Cash~~We ~~Flow~~have ~~Hedges~~not entered into any hedging activity during 2017. Depending on market conditions and availability of counterparties, we may elect to utilize short-term forward currency contracts in the future.

We have not entered into any hedging activity during 2016. Depending on market conditions and availability of counterparties, we may elect to utilize short-term forward currency contracts in the future.26

Prospector Interest Rate Swaps

At the time of our acquisition of Prospector, Prospector had outstanding a 2018 senior secured credit facility of $270 million (the “Prospector Senior Credit Facility”) which exposed Prospector to short-term changes in market interest rates as interest obligations on these instruments were periodically redetermined based on the prevailing LIBOR rate. Prior to our acquisition, a subsidiary of Prospector had entered into interest rate swaps with an aggregate maximum notional amount of $135 million. The interest rate swaps were entered into to reduce the variability of the cash interest payments under the Prospector Senior Credit Facility and to fix the interest on 50% of the outstanding borrowings under the facility. Prospector received interest at three-month LIBOR and paid interest at a fixed rate of 1.512% over the expected term of the Prospector Senior Credit Facility.

In the first quarter of 2015, we had repaid in full the remaining principal balance outstanding under the Prospector Senior Credit Facility; therefore, the related interest rate swaps were terminated. The termination resulted in a settlement at fair market value plus accrued interest of approximately $1 million recorded in “Interest expense net of amount capitalized.” We did not apply hedge accounting with respect to these interest rate swaps and therefore, changes in fair values were recognized as either income or loss in our Consolidated Statements of Operations. For the nine months ended September 30, 2015, a gain of approximately $1 million resulting from the change in fair value of the interest rate swaps was recorded in “Interest expense, net of amount capitalized.”

NOTE 14—FAIR VALUE OF FINANCIAL INSTRUMENTS

Our cash and cash equivalents, accounts receivable and accounts payable are by their nature short-term. As a result, the carrying values included in the accompanying Condensed Consolidated Balance Sheets approximate fair value.

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NOTE 15—FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair Value of Debt

The estimated fair values of our Senior Notes and Term Loan Facility were based on the quoted market prices for similar issues (Level 2 measurement).

The estimated fair value of our Senior Notes due July 15, 2022, excluding debt issuance costs of $6 million for ~~September~~March 3031, ~~2016~~2017 and December 31, ~~2015~~2016, respectively, and our Senior Notes due August 15, 2024, excluding debt issuance costs of $8 million for ~~September~~March 3031, ~~2016~~2017 and December 31, ~~2015~~2016, respectively, are as follows:

	Subject to Compromise				~~Not Subject to Compromise~~
	September 30, 2016				December 31, 2015
	March 31, 2017				December 31, 2016
(In thousands)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
6.75% Senior Notes due July 15, 2022	$	456,572	$	~~128~~83,~~982~~324	$	456,572	$	6583,~~062~~324
7.25% Senior Notes due August 15, 2024	527,010		~~149~~99,~~473~~146		527,010		7593,~~099~~544
Total senior unsecured notes	$	983,582	$	~~278~~182,~~455~~470	$	983,582	$	~~140~~176,~~161~~868

The estimated fair value of our Term Loan Facility, bearing interest at 5.2575% and 5.50%, excluding unamortized discount and debt issuance costs of $7 million ~~and $8 million~~ for ~~September~~both March 3031, ~~2016~~2017 and December 31, ~~2015~~2016, ~~respectively,~~ is as follows:

Subject to Compromise

~~Not Subject to Compromise~~

September 30, 2016

December 31, 2015

March 31, 2017

December 31, 2016

(In thousands)

Carrying Value

Estimated Fair Value

Carrying Value

Estimated Fair Value

Term Loan Facility

641,875

~~152~~251,~~044~~336

641,875

~~235~~244,~~889~~113

The carrying amount of our variable-rate debt, the Revolving Credit Facility, which is subject to compromise as of ~~September~~March 3031, 2017 and December 31, 2016, approximates fair value as such debt bears short-term, market-based interest rates. We have classified this instrument as Level 2 as valuation inputs used for purposes of determining our fair value disclosure are readily available published LIBOR rates.

NOTE 1516—ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table sets forth the changes in the accumulated balances for each component of “Accumulated other comprehensive loss” (“AOCL”) for the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017 and ~~2015~~2016. All amounts within the tables are shown net of tax.

(In thousands)	DefinedBenefitPension Items (1)			ForeignCurrencyItems			Total
Balance as of December 31, 2014	$	(22,911	)	$	(14,233	)	$	(37,144	)
Activity during period:
Other comprehensive loss before reclassification	—			(6,818		)	(6,818		)
Amounts reclassified from AOCL	570			—			570
Net other comprehensive income (loss)	570			(6,818		)	(6,248		)
Balance as of September 30, 2015	$	(22,341	)	$	(21,051	)	$	(43,392	)
Balance as of December 31, 2015	$	(20,351	)	$	(21,663	)	$	(42,014	)
Activity during period:
Other comprehensive income before reclassification	—			(768		)	(768		)
Other comprehensive loss before reclassification	—			2,068			2,068
Amounts reclassified from AOCL	~~455~~187			—			~~455~~187
Net other comprehensive income	~~455~~187			~~(768~~2,068		)	~~(313~~2,255		)
Balance as of September 30, 2016	$	(19,896	)	$	(22,431	)	$	(42,327	)
Balance as of March 31, 2016	$	(20,164	)	$	(19,595	)	$	(39,759	)
Balance as of December 31, 2016	$	(14,329	)	$	(24,329	)	$	(38,658	)
Activity during period:

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(1) Defined benefit pension items relate to actuarial losses, prior service credits, and the amortization of actuarial losses and prior service credits. Reclassifications from AOCL are recognized as expense on our Condensed Consolidated Statements of Operations through either “Contract drilling services” or “General and administrative.” See Note 12, “Employee Benefit Plans” for additional information.



Other comprehensive income before reclassification	—			876			876
Amounts reclassified from AOCL	(98		)	—			(98		)
Net other comprehensive income	(98		)	876			778
Balance as of March 31, 2017	$	(14,427	)	$	(23,453	)	$	(37,880	)

~~NOTE~~(1) ~~16—COMMITMENTS~~Defined ~~AND~~benefit ~~CONTINGENCIES~~pension items relate to actuarial losses, prior service credits, and the amortization of actuarial losses and prior service credits. Reclassifications from AOCL are recognized as expense on our Condensed Consolidated Statements of Operations through either “Contract drilling services” or “General and administrative.” See Note 13, “Employee Benefit Plans” for additional information.

NOTE 17—COMMITMENTS AND CONTINGENCIES

Purchase Commitments

InWe ~~connection with our capital expenditure program, we~~ have outstanding commitments, including shipyard and purchase commitments of approximately $~~592~~582 million asat ~~of September~~March 3031, ~~2016~~2017. Our ~~shipyard and~~ purchase commitments consist of obligations outstanding to external vendors primarily related to future capital purchases and ~~the~~$579 ~~construction~~million ofdue ~~three~~from ~~high-specification~~certain ~~jackup~~of ~~rigs,~~our ~~the Prospector 6, Prospector 7 and Prospector 8 (collectively, the “Three High~~Non-~~Spec~~Filing ~~Jackups~~entities ~~Under~~to ~~Construction”) by~~ Shanghai Waigaoqiao Ship Co. Ltd. (“SWS”) ~~in China.~~ ~~Our outstanding shipyard commitments include $579 million, of which $192 million is due in 2016~~ for the ~~Prospector~~construction 7of ~~and~~three ~~$387~~high ~~million~~specification isjackups ~~due~~ in ~~2017~~China. These ~~for~~units ~~the~~are ~~Prospector~~technically 6complete, ~~and the Prospector 8. In April 2016~~however, we ~~agreed~~have reached agreements with SWS to andefer ~~extension of the~~ delivery of ~~the~~these ~~Prospector~~units 6,until ~~Prospector~~October ~~7 and Prospector 8 to the second quarter of~~ 2017, ~~the~~as ~~fourth~~there ~~quarter of 2016 and the fourth quarter of 2017, respectively. We~~ are ~~currently~~no inopportunities ~~discussions with SWS~~ to ~~further~~secure ~~extend~~acceptable ~~each~~contracts offor ~~these~~the ~~delivery~~assets ~~dates and have agreed~~ in ~~principle~~the ~~regarding~~current ~~these~~business ~~extensions, but such extensions remain subject to documentation~~environment. Each newbuild has been built pursuant to a contract between one of these ~~subsidiaries~~Non-Filing entities and SWS, without our parent company guarantee or other direct recourse to any of our other subsidiaries other than the applicable ~~subsidiary~~non-filing entity. ~~The~~For ~~Prospector~~us ~~subsidiaries~~to ~~are~~take delivery of these assets, we would require an acceptable contract to justify the purchase price and suitable financing. In 2017 and 2016, we did not ~~included~~make inany payments on the ~~Bankruptcy~~commitments ~~cases~~related to the three high specification jackups.

Litigation

We are a defendant in certain claims and litigation arising out of operations in the ordinary course of business, the resolution of which, in the opinion of management, will not have a material adverse effect on our financial position, results of operations or cash flows. There is inherent risk in any litigation or dispute and no assurance can be given as to the outcome of these claims.

Tax Contingencies

We operate in a number of countries throughout the world and our tax returns filed in those jurisdictions are subject to review and examination by tax authorities within those jurisdictions. As of ~~September~~March 3031, ~~2016~~2017, we have received tax audit claims of approximately $~~351~~382 million, of which $9095 million is subject to indemnity by Noble, primarily in Mexico and Brazil, attributable to our income, customs and other business taxes. In addition, as of ~~September~~March 3031, ~~2016~~2017, approximately $3134 million of tax audit claims in Mexico assessed against Noble are subject to indemnity by us as a result of the Spin-Off. We have contested, or intend to contest, these ~~claims~~assessments, including through litigation if necessary. We may also address certain of these claims as part of the resolution of our Bankruptcy cases and subsequent winding up of certain subsidiaries. Tax authorities may issue additional ~~claims~~assessments or pursue legal actions as a result of tax audits, and we cannot predict or provide assurance as to the ultimate outcome of such ~~claims~~assessments and legal actions. In some cases, we will be required to post a cash deposit as collateral while we defend these claims. We could be required to post such collateral in the near future, and such amounts could be substantial and could have a material adverse effect on our liquidity, financial condition, results of operations and cash flows. AsWe ~~of September 30, 2016, we~~ have no surety bonds or letters of credit associated with tax audit claims outstanding as of March 31, 2017.

In January 2015, a subsidiary of Noble received an unfavorable ruling from the Mexican Supreme Court on a tax depreciation position claimed in periods prior to the Spin-Off. Although the ruling does not constitute mandatory jurisprudence in Mexico, it does create potential indemnification exposure for us under the Tax Sharing Agreement with Noble if Noble is ultimately determined to be liable for any amounts. We are presently unable to determine a timeline on this matter, nor are we able to determine the extent of our liability. We have considered this matter under ASC 460, Guarantees, and concluded that our liability under this matter is reasonably possible. Due to these current uncertainties, we are not able to reasonably estimate the magnitude of any liability at this time.

Petrobras has notified us, along with other industry participants, that it is currently challenging assessments by Brazilian tax authorities of withholding taxes associated with the provision of drilling rigs for its operations in Brazil during the years 2008 and 2009 totaling $8789 million, of which $25 million is subject to indemnity by Noble. Petrobras has also notified us that if they must pay such withholding taxes, they will seek reimbursement from us. We believe that we are contractually indemnified by Petrobras for these amounts and dispute the validity of the assessment. We have notified Petrobras of our position. We will, if necessary, vigorously defend our rights. If we were required to pay such reimbursement, however, the amount of such reimbursement could be substantial and could have a material adverse effect on our financial condition, results of operations and cash flows.

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In addition, a tax law was enacted in Brazil, effective January 1, 2015, that under certain circumstances would impose a 15% to 25% withholding tax on charter hire payments made to a non-Brazilian related party exceeding certain thresholds of total contract value. Although we believe that our operations are not subject to this law, the tax is being withheld at the source by our customer and we have recorded $8 million withholding tax expense since inception of the law. Discussions with our customer over the applicability of this legislation are ongoing.

Settlement with Noble Corporation

On February 12, 2016, as part of the PSA, we entered into the Term Sheet with Noble with respect to the Noble Settlement Agreement, which we executed on April 29, 2016. The Noble Settlement Agreement will become effective upon the effective date of the Debtors’ plan of reorganization if such plan is substantially similar to the Debtors’ Plan filed with the PSA. In light of the Bankruptcy Court’s recent order on October 28, 2016, we intend to discuss this requirement with Noble if the Debtors elect to pursue a plan of reorganization that will not fulfill this condition to the Noble Settlement Agreement. The Noble Settlement Agreement provides that Noble may only unilaterally terminate the Noble Settlement Agreement if: (i) the Debtors’ file a plan of reorganization with the Bankruptcy Court that does not incorporate the terms and conditions of the Noble Settlement Agreement, (ii) the Debtors file a motion before the Bankruptcy Court to terminate their obligations under the Noble Settlement Agreement, or (iii) the release of claims by the Debtors in favor of Noble, as detailed below, is deemed invalid or unenforceable.

Pursuant to the Noble Settlement Agreement, Noble will provide direct bonding in fulfillment of the requirements necessary to challenge tax assessments in Mexico relating to our business for the tax years 2005 through 2010. The Mexican Tax Assessments were originally assigned to us by Noble pursuant to the Tax Sharing Agreement which was entered into in connection with the Spin-Off. The Company has contested or intends to contest the Mexico Tax Assessments and may be required to post bonds in connection thereto.

In addition, on August 5, 2016, we entered into a binding term sheet with respect to an amendment to the Noble Settlement Agreement (the “Noble Settlement Agreement Amendment”). Upon effectiveness of the Noble Settlement Agreement Amendment, certain provisions of the Tax Sharing Agreement will be further amended to permit us, at our option, to defer up to $5 million in amounts owed to Noble under the Tax Sharing Agreement with respect to the Mexican Tax Assessments (the “Deferred Noble Payment Amount”). In consideration for this deferral, we would issue an unsecured promissory note to Noble in the amount of the Deferred Noble Payment Amount (the “Noble Note”) which would be due and payable on the fourth anniversary of the effective date of the Amended Plan. The Noble Note would accrue interest, quarterly, to be paid either: (x) in cash at 12% per annum, or (y) in kind at 15% per annum (in our discretion).

As of September 30, 2016, our estimated Mexican Tax Assessments totaled approximately $172 million, which is included in the tax assessment amounts disclosed above, with assessments for 2009 and 2010 yet to be received. Noble will be responsible for all of the ultimate tax liability for Noble legal entities and 50% of the ultimate tax liability for our legal entities relating to the Mexican Tax Assessments.

In consideration for this support, we have agreed to release Noble, fully and unconditionally, from any and all claims in relation to the Spin-Off. Upon the effectiveness of the Noble Settlement Agreement, a material portion of our Mexican Tax Assessments, and any corresponding ultimate tax liability, will be assumed by Noble on the Effective Date in connection with certain amendments to the Tax Share Agreement executed between Noble and Paragon for the Spin-Off. Until such time, the current Tax Sharing Agreement remains in effect.

Other Contingencies

Our subsidiary used a commercial agent in Brazil in connection with Petrobras drilling contracts. The agent pleaded guilty in Brazil in connection with the award by Petrobras of a drilling contract to one of our competitors as part of a wider investigation of Petrobras’ business practices. The agent has represented a number of different companies in Brazil over many years, including several offshore drilling contractors. Since mid-2015, we have been conducting an independent review of our relationship with the agent and with Petrobras. Our review to date has found no evidence of wrongdoing by our employees or the commercial agent on our behalf. The SEC and the U.S. Department of Justice are aware of our review.

We are currently party to several commercial disputes with a former customer relating to services we performed under our contracts with them. We believe we have a reasonable possibility of prevailing in these disputes and have not included these amounts in our provision for contingencies. In the event that we are unsuccessful in resolving these disputes, our ultimate liability could be up to $15 million.

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if they must pay such withholding taxes, they will seek reimbursement from us. We believe that we are contractually indemnified by Petrobras for these amounts and dispute the validity of the assessment. We have notified Petrobras of our position. We will, if necessary, vigorously defend our rights. If we were required to pay such reimbursement, however, the amount of such reimbursement could be substantial and could have a material adverse effect on our financial condition, results of operations and cash flows.

In addition, a tax law was enacted in Brazil, effective January 1, 2015, that under certain circumstances would impose a 15% to 25% withholding tax on charter hire payments made to a non-Brazilian related party exceeding certain thresholds of total contract value. Although we believe that our operations are not subject to this law, the tax has been withheld at the source by our customer and we have recorded $8 million withholding tax expense since inception of the law. Discussions with our customer over the applicability of this legislation are ongoing.

Litigation with Noble Corporation

On February 12, 2016, we entered into a binding term sheet with Noble with respect to the Noble Settlement Agreement, which we executed on April 29, 2016. The Noble Settlement Agreement would have become effective upon the consummation of the Original Plan, or a plan of reorganization substantially similar thereto, and the satisfaction of certain other conditions precedent as set forth in the Noble Settlement Agreement. Pursuant to the Noble Settlement Agreement, Noble would have provided direct bonding in fulfillment of the requirements necessary to challenge tax assessments in Mexico relating to our business for the tax years 2005 through 2010 (the “Mexican Tax Assessments”). Additionally, pursuant to the Noble Settlement Agreement, Noble would have been responsible for all of the ultimate tax liability for Noble legal entities and 50% of the ultimate tax liability for our legal entities following the defense of the Mexican Tax Assessments. In consideration for this support, we had agreed to release Noble, fully and unconditionally, from any and all claims in relation to the Spin-Off.

On May 2, 2017, the Company filed further amendments to the New Plan (the Consensual Plan) and a related disclosure statement with the Bankruptcy Court. Pursuant to the Consensual Plan, the Company’s creditors will pursue litigation against Noble through the establishment of the Litigation Trust, which the Company will fund with the Litigation Loan Amount of up to $10 million. Under the Consensual Plan, the first $10 million of proceeds from the litigation against Noble will be applied to repay the Litigation Loan Amount, and any balance of the first $10 million of proceeds will be shared 50%/50% between the Bondholders and Secured Creditors. Any amounts above the first $10 million of proceeds will be split in a ratio of 75%/25% in favor of the Bondholders.

Other Contingencies

As previously reported, our subsidiary used a commercial agent in Brazil in connection with Petrobras drilling contracts. The agent pleaded guilty in Brazil in connection with the award by Petrobras of a drilling contract to one of our competitors as part of a wider investigation of Petrobras’ business practices. The agent has represented a number of different companies in Brazil over many years, including several offshore drilling contractors. Since mid-2015, we have been conducting an independent review of our relationships with the agent and with Petrobras. Our review to date has found no evidence of wrongdoing by our employees or the commercial agent on our behalf. The SEC and U.S. Department of Justice are aware of our review.

We are currently party to several commercial disputes with a former customer relating to service we performed under our contracts with them. We believe we have a reasonable possibility of loss in these disputes but do not believe our exposure exceeds approximately $15 million.

Insurance

We maintain certain insurance coverage against specified marine perils, which include physical damage and loss of hire for certain units.

We maintain insurance in the geographic areas in which we operate, although pollution, reservoir damage and environmental risks generally are not fully insurable. Our insurance policies and contractual rights to indemnity may not adequately cover our losses or may have exclusions of coverage for some losses. We do not have insurance coverage or rights to indemnity for all risks, including loss of hire insurance on most of the rigs in our fleet or named windstorm perils with respect to our rigs cold-stacked in the U.S. Gulf of Mexico. Uninsured exposures may include expatriate activities prohibited by U.S. laws and regulations, radiation hazards, certain loss or damage to property on board our rigs and losses relating to shore-based terrorist acts or strikes. If a significant accident or other event occurs and is not fully covered by insurance or contractual indemnity, it could materially adversely affect our financial position, results of operations or cash flows. Additionally, there can be no assurance that those parties with contractual obligations to indemnify us will necessarily be financially able to indemnify us against all these risks.

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laws and regulations, radiation hazards, certain loss or damage to property on board our rigs and losses relating to shore-based terrorist acts or strikes. If a significant accident or other event occurs and is not fully covered by insurance or contractual indemnity, it could materially adversely affect our financial position, results of operations or cash flows. Additionally, there can be no assurance that those parties with contractual obligations to indemnify us will necessarily be financially able to indemnify us against all these risks.

Other

As of ~~September~~March 3031, ~~2016~~2017, we had letters of credit of $8769 million and performance bonds totaling $~~115~~97 million supported by surety bonds outstanding and backed by $7557 million in letters of credit and $279 million held in restricted cash. Certain of our subsidiaries issued guarantees to the temporary import status of rigs or equipment imported into certain countries in which we operated. These guarantees are issued in lieu of payment of custom, value added or similar taxes in those countries.

Separation Agreements

In connection with the Spin-Off, we entered into several definitive agreements with Noble or its subsidiaries that, among other things, set forth the terms and conditions of the Spin-Off and provide a framework for our relationship with Noble after the Spin-Off, including the following agreements:


•	Master Separation Agreement;


•	Tax Sharing Agreement;


•	Employee Matters Agreement;


•	Transition Services Agreement relating to services Noble and Paragon will provide to each other on an interim basis; and


•	Transition Services Agreement relating to Noble’s Brazil operations.

Pursuant to these agreements with Noble, our Condensed Consolidated Balance Sheets include the following balances due from and to Noble as of ~~September~~March 3031, ~~2016~~2017 and December 31, ~~2015~~2016:

	September 30,		December 31,
	March 31,		December 31,
(In thousands)	~~2016~~2017		~~2015~~2016
Accounts receivable	$	131,~~960~~007	$	221,~~695~~149
Other current assets	~~1,930~~461		~~3,032~~461
Other assets	7,~~039~~274		67,~~686~~157
Due from Noble	$	228,~~929~~742	$	328,~~413~~767
Accounts payable	$	8213	$	211
Other current liabilities	2,403		62,~~067~~594
Other liabilities	32,~~268~~527		3,268
Due to Noble	$	54,~~753~~943	$	96,~~546~~073

These receivables and payables primarily relate to rights and obligations under the Tax Sharing Agreement and the Transition Services Agreement (Brazil).

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Master Separation Agreement

We entered into the Master Separation Agreement with Noble Corporation, a Cayman Islands company and an indirect, wholly-owned subsidiary of Noble (“Noble-Cayman”), which provided for, among other things, the Distribution of our ordinary shares to Noble shareholders and the transfer to us of the assets and the assumption by us of the liabilities relating to our business and the responsibility of Noble for liabilities related to Noble’s, and in certain limited cases, our business. The Master Separation Agreement identified which assets and liabilities constitute our business and which assets and liabilities constitute Noble’s business.

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Tax Sharing Agreement

We entered into the Tax Sharing Agreement with Noble, which governs the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and certain other matters regarding taxes following the Distribution.

Employee Matters Agreement

We entered into an Employee Matters Agreement with Noble-Cayman to allocate liabilities and responsibilities relating to our employees and their participation in certain compensation and benefit plans maintained by Noble or a subsidiary of Noble. The Employee Matters Agreement provides that, following the Distribution, most of our employee benefits are provided under compensation and benefit plans adopted or assumed by us. In general, our plans are substantially similar to the plans of Noble or its subsidiaries that covered our employees prior to the completion of the Distribution.

Transition Services Agreement

We entered into a Transition Services Agreement with Noble-Cayman pursuant to which Noble-Cayman provides, on a transitional basis, certain administrative and other assistance, generally consistent with the services that Noble provided to us before the Separation, and we provide certain transition services to Noble and its subsidiaries. The charges for the transition services are generally intended to allow the party providing the services to fully recover the costs directly associated with providing the services, plus all out-of-pocket costs and expenses, generally without profit. The charges for each of the transition services generally are based on either a pre-determined flat fee or an allocation of the costs incurred, including certain fees and expenses of third-party service providers. We concluded providing services to Noble, and Noble concluded providing services to us, in the third quarter of 2016.

Transition Services Agreement (Brazil)

We and Noble-Cayman and certain other subsidiaries of Noble entered into a Transition Services Agreement (and a related rig charter) pursuant to which we provide certain transition services to Noble and its subsidiaries in connection with Noble’s Brazil operations. The provision of these rig-based and shore-based support services concluded in the second quarter of 2016 in conjunction with the termination of Noble’s business in Brazil.

30NOTE 18—SUPPLEMENTAL CASH FLOW INFORMATION

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NOTE 17—SUPPLEMENTAL CASH FLOW INFORMATION

The net effect of changes in other assets and liabilities on cash flows from operating activities is as follows:

	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
(In thousands)	~~2016~~2017			~~2015~~2016
Accounts receivable	$	~~134~~18,~~082~~643		$	~~177~~23,~~765~~471
Other current assets	29(4,~~602~~237		)	(14,~~711~~218		)
Other assets	~~8,254~~862			~~(11~~5,~~687~~285		)
Accounts payable and accrued payroll	(3317,~~694~~787		)	(253,~~003~~966		)
Other current liabilities	(91,~~295~~981		)	~~(104~~2,~~701~~960		)
Other liabilities	(61,~~748~~232		)	~~(56~~1,~~889~~081		)
Prepaid and accrued reorganization items	268,~~082~~449			—9,122
Net change in other assets and liabilities	$	~~148~~2,~~283~~717		$	~~(22~~42,~~226~~171	)
Supplemental information for non-cash activities:
Assets related to Sale-Leaseback	$	—		$	465,043
Accrued capital expenditures	$	1,447		$	4,883
Adjustments to distribution by former parent	—			9,493
Reclassification of Liabilities subject to compromise	—			1,709,347
Reclassification of Liabilities subject to compromise	2,343,963			—
Netting of VAT receivables and payables	12,307			—

We received income tax refunds, net of payments, of approximately $10 million and made income tax payments of approximately $66 million during the nine months ended September 30, 2016 and 2015, respectively.

NOTE 18—SEGMENT AND RELATED INFORMATION

At September 30, 2016, our contract drilling operations were reported as a single reportable segment, Contract Drilling Services, which reflects how our business is managed, and the fact that all of our drilling fleet is dependent upon the worldwide oil industry. The mobile offshore drilling units that comprise our offshore rig fleet operated in a single, global market for contract drilling services and are often redeployed globally due to changing demands of our customers, which consisted leading national, international and independent oil and gas companies throughout the world. Our Contract Drilling Services segment conducts contract drilling operations in the North Sea, the Middle East, India, Brazil, Mexico, West Africa and Southeast Asia.

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We made income tax payments, of approximately $2 million and $5 million during the three months ended March 31, 2017 and 2016, respectively.

NOTE 19—SEGMENT AND RELATED INFORMATION

As of March 31, 2017, our contract drilling operations were reported as a single reportable segment, Contract Drilling Services, which reflects how our business is managed, and the fact that all of our drilling fleet is dependent upon the worldwide oil industry. The mobile offshore drilling units that comprise our offshore rig fleet operate in a single, global market for contract drilling services and are often redeployed globally due to changing demands of our customers, which consisted largely of major non-U.S. and government owned/controlled oil and gas companies throughout the world. Our contract drilling services segment is able to conduct contract drilling operations in the North Sea, the Middle East, India, Brazil, Mexico, West Africa and Southeast Asia. Under the Consensual Plan, if approved, we will focus on the markets of the North Sea, the Middle East and India.

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ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes as of ~~September~~March 3031, ~~2016~~2017 and for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2016~~2017 and ~~2015~~2016 contained in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016. Unless the context requires otherwise, or we specifically indicate otherwise, when used in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, the terms “Paragon,” the “Company,” “we,” “us” or “our” refer to Paragon Offshore plc together with its subsidiaries.

Overview

Our financial and operating results for the three months ended March 31, 2017 include:


•	First quarter 2017 revenues of $57 million; net loss of $70 million or $0.79 per share


•	Adjusted EBITDA of negative $2 million net of reorganization items


•	Cash balance as of March 31, 2017 of $833 million excluding restricted cash


•	Contract backlog as of March 31, 2017 of $183 million

The Company

We are a global provider of offshore drilling rigs. Our ~~operated~~ fleet includes 34 jackups (including two high specification heavy duty/harsh environment jackups), four drillships and ~~two~~one ~~semisubmersibles~~semisubmersible. ~~We refer to our semisubmersibles and drillships collectively as “floaters.”~~ Our primary business is contracting our rigs, related equipment and work crews to conduct oil and gas drilling and workover operations for our exploration and production customers on a dayrate basis around the world.

We currently operate in significant hydrocarbon-producing geographies throughout the world, including the North Sea, the Middle East and India. As of March 31, 2017, our contract backlog was $183 million and included contracts with national, international and independent oil and gas companies.

We are a public limited company registered under the Companies Act 2006 of England. In July 2014, Noble Corporation plc (“Noble”) transferred to us the assets and liabilities (the “Separation”) constituting most of Noble’s standard specification drilling units and related assets, liabilities and business. On August 1, 2014, Noble made a pro rata distribution to its shareholders of all of our issued and outstanding ordinary shares (the “Distribution” and, collectively with the Separation, the “Spin-Off”).

Market Outlook

Brent crude oil prices are a key factor in determining our customers’ current activity levels, as well as a critical input customers use to set future budgets and define drilling programs. ~~The~~In ~~closing~~the ~~price~~first quarter of ~~$49.06 per barrel on September 30~~2017, ~~2016~~Brent ~~was~~prices ~~little~~fell ~~changed~~7% from the December 30, 2016 closing price of $4956.6882 per barrel to close at ~~the~~$52.83 ~~end~~per ofbarrel ~~the~~on ~~second~~March ~~quarter~~31, ~~2016~~2017. ~~Nevertheless~~Year-to-date, ~~Brent~~as ~~prices~~of ~~experienced~~May ~~considerable~~1, ~~volatility~~2017, ~~during~~Brent ~~the~~crude ~~third~~oil ~~quarter~~prices ~~2016,~~have ~~falling~~declined toby aapproximately ~~low~~9% ofto $~~41.~~51.52 per barrel. While ~~in early August before rebounding on news at the end of September that~~ OPEC ~~had~~has ~~agreed~~maintained toits ~~the~~voluntary ~~framework of an agreement that would limit~~ production bylimits, ~~member countries~~U. InS. ~~October,~~onshore ~~President~~drilling ~~Vladimir~~activity ~~Putin~~recovered ~~announced~~as ~~that~~the ~~Russia~~Baker ~~was~~Hughes ~~“ready~~Oil toRig ~~join”~~Count inIndex arose ~~freeze~~from or525 ~~cut~~rigs todrilling ~~“preserve~~at ~~stability~~year-end in2016 ~~the~~to ~~global~~652 ~~energy~~rigs ~~markets.” Details~~as of ~~the~~March ~~agreement are set to be resolved at the November 2016 OPEC meeting. Through September 30~~31, ~~2016~~2017, ~~Brent~~indicating ~~prices~~a ~~have~~significant ~~risen~~increase ~~nearly~~in ~~32%~~shale ~~this~~drilling ~~year~~that ~~compared~~is toraising ~~the~~concerns ~~closing~~about ~~price of $37~~oversupply.~~28 per barrel on December 31, 2015.~~

Fixture activity in the ~~third~~first quarter of ~~2016~~2017 increased for ~~both~~ jackups and ~~floaters~~decreased ~~increased~~slightly for floaters as compared to the ~~second~~fourth quarter of 2016. According to industry data, there were 4661 new jackup contract announcements or fixtures during the ~~third~~first quarter of ~~2016~~2017 compared to 2956 new fixtures during the ~~second~~fourth quarter of 2016. Both totals exclude instances where companies mutually agreed to renegotiate dayrates which numbered zero and ~~three~~five in the ~~third~~first quarter of 2017 and ~~second~~fourth ~~quarters~~quarter of 2016, respectively. Nineteen ~~Activity~~of ~~remains~~the ~~lower~~fixtures ~~than~~ in ~~third~~the fourth quarter of ~~2015,~~2016 ~~when~~were 64between ~~new~~a ~~fixtures~~Chinese ~~were~~drilling ~~reported. In~~contractor ~~the~~and ~~floater~~a ~~segment,~~Chinese ~~there~~oil ~~were~~company 21and ~~new~~generally ~~fixtures~~not ~~and~~considered 2to ~~renegotiations~~be ~~during~~competitive ~~the~~opportunities ~~third~~for ~~quarter~~international ofdrilling ~~2016~~contractors. There ~~compared~~were tono 14such ~~new~~ fixtures ~~and~~in ~~3 renegotiations during~~ the ~~second~~first quarter of ~~2016~~2017. ~~For~~Activity ~~the first time in 2016, new contracting activity~~ for ~~floaters~~jackups was higher ~~year-on-year~~than ~~when~~in ~~compared~~first ~~with third~~ quarter ~~2015~~of 2016, ~~which~~when ~~saw~~40 15 new fixtures ~~and~~were ~~2 renegotiations~~reported.

~~Excluding~~In ~~a $275,000 per day fixture for a high specification jackup in~~ the ~~Norwegian~~floater ~~sector~~segment, ofthere ~~the~~was ~~North Sea,~~ a ~~region~~slight ~~not~~decrease ~~comparable to the rest of global market due to the special technical requirements of jackups which operate~~ in ~~those~~activity ~~waters,~~quarter-on-quarter ~~average~~with ~~dayrates~~29 ~~for~~new ~~jackup~~ fixtures ~~were~~and ~~$77,000~~no ~~per~~renegotiations ~~day,~~during ~~down approximately 13% in~~ the ~~third~~first quarter ~~2016~~of as2017 compared to ~~the~~31 ~~second quarter 2016, when dayrates averaged $88,000 per day. Compared to $113,000 per day, the average dayrate of~~ new ~~jackup~~ fixtures inand ~~the~~2 ~~third~~renegotiations ~~quarter~~during ofthe ~~2015,~~fourth ~~dayrates in third~~ quarter of 2016 ~~were 32% lower~~. ~~During~~New ~~the~~contracting ~~third~~activity ~~quarter of 2016, dayrates~~ for ~~new~~floaters ~~floater~~was ~~fixtures~~also ~~rose~~lower ~~11% quarter~~year-~~over~~on-~~quarter,~~year ~~averaging~~when ~~approximately $264,000 per day~~ compared towith ~~$237,000~~first ~~per day in the second~~ quarter of 2016~~. However~~, ~~new~~which ~~floater~~saw ~~fixture~~29 ~~dayrates~~new infixtures ~~the~~and ~~third quarter 2016 were~~ 5% ~~lower than the average in third quarter 2015 of $277,000 per day~~renegotiations. ~~The dayrate data is based on information provided by third party sources and excludes fixtures for which no dayrate has been publicly reported.~~

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~~currently~~Average ~~stacked~~jackup indayrates afor ~~shipyard~~new fixtures in ~~Puerto~~the ~~Rico~~first ~~and~~quarter ~~Paragon~~of 2017 were approximately $121,000. This is ~~winding~~greater ~~down~~than ~~its~~the ~~operational~~average ~~presence~~new jackup fixture dayrate of $74,000 for the fourth quarter of 2016 driven by eleven contracts in ~~Brazil~~the $130,000 - $172,000 per day range in Saudi Arabia, Mexico, and Australia. ~~Backlog~~Forty-three ~~related~~of tothe ~~this~~reported ~~dispute~~jackup isfixtures ~~not~~have ~~included~~no inreported ~~our~~dayrate. The remaining seven fixtures with reported ~~backlog~~dayrates asaveraged ofapproximately ~~September~~$67,000, 30showing a continued decline quarter over quarter. Compared to $96,000 per day for the average new dayrate fixture in the first quarter of 2016, dayrates in first quarter of 2017 were 25% higher. The ~~Paragon~~dayrate ~~will~~data ~~vigorously~~is ~~pursue~~based ~~all~~on ~~legal~~information ~~remedies~~provided ~~available~~by tothird usparty ~~under~~sources ~~these~~and ~~contracts~~excludes fixtures for which no dayrate has been publicly reported.

AsDuring ofthe ~~October~~first ~~19,~~quarter ~~2016~~of 2017, ~~there~~dayrates ~~were 107 jackup drilling rigs under construction according to third party data sources. These rigs are currently scheduled~~ for ~~delivery~~new ~~between~~floater ~~2016~~fixtures ~~through~~were as21% ~~late~~lower asquarter-over-quarter, ~~2020. Certain~~averaging ~~drilling~~approximately ~~contractors~~$189,000 ~~with~~per ~~jackups~~day ~~under~~compared ~~construction,~~to ~~including Paragon~~$241,000 ~~have~~per ~~reported~~day ~~that~~in ~~they have reached agreements with~~ the ~~shipyards~~fourth ~~where~~quarter ~~their~~of ~~rigs~~2016. New ~~are~~floater ~~under~~fixture ~~construction~~dayrates toin ~~delay~~ the ~~delivery~~first ofquarter ~~their~~2017 ~~rigs~~were as18% alower ~~result~~than of the ~~challenging~~average ~~market~~in ~~environment.~~first ~~This~~quarter ~~combination~~2016 of ~~new supply and lower activity levels has negatively impacted the contracting environment~~$230,000 ~~and~~per ~~has intensified price competition~~day. The Ifdayrate ~~this~~data ~~persists,~~is webased ~~could~~on beinformation ~~required~~provided toby ~~increase~~third ~~our~~party ~~capital~~sources ~~investment~~and toexcludes ~~keep~~fixtures ~~our~~for ~~jackup~~which ~~rigs competitive or to stack or scrap rigs that are~~ no ~~longer~~dayrate ~~marketable~~has inbeen ~~the~~publicly ~~current environment~~reported.

InAs ~~addition,~~of ~~there~~April ~~are~~26, ~~reported~~2017, tothere bewere 63101 ~~floating~~jackup drilling rigs under construction ~~or on order~~ according to third party data sources. ~~with~~These ~~deliveries~~rigs ~~between~~are ~~2016~~currently ~~and~~scheduled ~~2020. Break even oil prices~~ for ~~projects~~delivery ~~requiring~~between ~~the~~2017 ~~use~~through ofas ~~floating~~late ~~assets~~as is2020. Certain ~~significantly~~drilling ~~higher~~contractors ~~than~~with ~~for~~jackups ~~projects~~under ~~requiring~~construction, ~~jackup~~including ~~rigs. Also~~Paragon, ahave ~~greater~~reported ~~portion~~that ofthey ~~the~~have ~~industry’s~~reached ~~exploration~~agreements ~~work~~with isthe ~~done~~shipyards inwhere ~~deepwater~~their asrigs ~~compared~~are ~~with~~under ~~shallow~~construction ~~water~~to ~~and~~delay ~~exploration~~the ~~budgets~~delivery ~~are~~of ~~often~~their ~~reduced~~rigs oras ~~eliminated~~a inresult ~~periods~~ of ~~low~~the ~~commodity~~challenging ~~prices~~market environment. We ~~believe~~This ~~these~~combination ~~factors~~of ~~will~~new ~~continue~~supply toand ~~put~~lower ~~pressure~~activity onlevels ~~the~~has ~~dayrates~~negatively ~~and~~impacted ~~utilization~~the ~~for~~contracting ~~floating~~environment, ~~assets~~and ~~for~~has ~~the~~intensified ~~next~~price ~~several years~~competition. We ~~also~~If ~~believe~~this ~~that~~persists, ~~older~~we ~~floating~~could ~~assets will~~ be atrequired ato ~~disadvantage~~increase inour ~~securing~~capital ~~new~~investment ~~work~~to ~~because~~keep ~~new~~our ~~floating~~jackup rigs ~~offer~~competitive ~~greater~~or ~~technical~~to ~~capabilities~~stack ~~and~~or ~~efficiencies,~~scrap ~~which~~rigs isthat ~~generally~~are ~~not~~no ~~the~~longer ~~case~~marketable in the ~~jackup~~current ~~segment~~environment.

In ~~summary~~addition, ~~while~~there weare ~~see~~reported ~~some~~to ~~cause~~be ~~for~~47 ~~optimism~~floating ~~based~~rigs onunder ~~the~~construction ~~increase~~or inon ~~the~~order ~~fixture~~according ~~activity~~to ~~for both floaters and jackups in the~~ third ~~quarter~~party ~~2016,~~data wesources ~~remain~~with ~~cautious~~deliveries inbetween ~~our~~2017 ~~near-term~~and ~~outlook~~2020. ~~Despite~~Break ~~recent~~even ~~improvements in~~ oil prices, ~~we believe dayrates and utilization~~ for ~~both~~projects ~~floaters~~requiring ~~and~~the ~~jackups~~use ~~could remain low for some period~~ of ~~time~~floating ~~and~~assets weare ~~continue~~significantly tohigher ~~adjust~~than ~~our~~for ~~cost~~projects ~~structure~~requiring tojackup ~~accommodate this reality~~rigs. Also, Wea ~~anticipate~~greater ~~that~~portion ~~over~~of the ~~next~~industry’s ~~several~~exploration ~~months,~~work ~~the~~is ~~industry~~done ~~will~~in ~~see~~deepwater ~~few~~as ~~tenders~~compared ~~for~~to ~~new~~shallow ~~drilling~~water ~~activity~~ and ~~that~~exploration ~~the~~budgets ~~available~~are ~~tenders~~often ~~will~~reduced beor ~~highly~~eliminated ~~competitive,~~in ~~potentially~~periods ~~driving~~of ~~dayrates~~low ~~even~~commodity ~~lower~~prices. AsWe ~~evidenced~~believe bythese ~~several~~factors ~~floating asset contract cancellations during the third quarter of 2016, we expect that offshore contract drillers~~ will continue to beput ~~involved~~pressure ~~in negotiations~~ on ~~existing~~the ~~contracts to reduce~~ dayrates and~~/or~~ ~~contract term. Additional contract cancellations remain possible. Prolonged periods of low~~ utilization ~~and~~for ~~lower~~floating ~~dayrates~~assets ~~could~~for ~~also result in~~ the ~~recognition~~next ofseveral ~~additional impairment charges on certain of our drilling rigs~~years. ~~However,~~We wealso believe that ~~reduced~~older ~~drilling~~floating ~~activity~~assets iswill ~~resulting~~be inat ~~lower global oil supply. The combination of generally forecasted increasing global demand for hydrocarbons and natural decline, combined with~~ a ~~production~~disadvantage ~~freeze~~in orsecuring ~~cut~~new bywork ~~OPEC~~because ~~members~~new ~~and~~floating ~~affiliated~~rigs ~~countries,~~offer ~~will~~greater ~~eventually~~technical ~~drive~~capabilities ~~oil prices higher~~ and ~~will cause oil and gas companies to resume drilling activity. Despite current conditions~~efficiencies, wewhich ~~continue~~is togenerally ~~have~~not ~~confidence in~~ the ~~longer-term~~case ~~fundamentals~~in ~~for~~ the ~~industry~~jackup segment.

Commodity prices rose throughout much of the year during 2016 aided by the agreement announced in the fourth quarter of 2016 by OPEC to limit oil production beginning January 2017. However, the increase in prices has driven activity onshore higher in the U.S. and as previously discussed, prices during the first quarter of 2017 declined. As the fixture activity has illustrated, there has not been a significant increase in utilization for offshore contract drilling companies. Thus, we remain cautious in our near-term outlook. We continue to believe that as the industry recovers and drilling activity increases our customers will begin to pursue shallow water opportunities utilizing jackup rigs followed by an eventual recovery for deep and ultradeepwater projects utilizing floating rigs. However, we cannot predict when this increase in activity across the various segments may occur. While Paragon is positioning itself to benefit from an eventual industry recovery, we are not expecting one in the immediate future and we may experience low dayrates relative to historical highs and low utilization levels for some time.

Chapter 11 Filing

On February 14, 2016, the Debtors filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code in the Bankruptcy Court. On (“April 19, 2016, the Bankruptcy ~~cases”)~~Court approved the Company’s disclosure statement and certain amendments to the Original Plan. On August 515, 2016, the Debtors filed acertain ~~disclosure~~amendments ~~statement~~to ~~supplement~~the Original Plan and ~~Amended~~a ~~Plan~~supplemental disclosure statement with the Bankruptcy Court. OnBy oral ruling on October 28, 2016, ~~the~~and ~~Bankruptcy~~by ~~Court~~written ~~issued~~order andated ~~oral~~November ~~ruling~~15, ~~denying~~2016, the Bankruptcy Court denied confirmation of the Debtors’ ~~Amended~~amended Original Plan. ~~Paragon~~Consequently, ison ~~currently~~November ~~evaluating~~29, ~~its~~2016, ~~potential~~the ~~courses~~Noteholder Group terminated the PSA effective as of ~~action~~December 2, 2016.

~~Since~~ ~~the~~On ~~filing~~February ~~date~~7, 2017, the ~~Debtors~~Company ~~have~~filed ~~operated~~the ~~their~~New ~~business~~Plan asand ~~“debtors-in-possession”. Under~~related disclosure statement with the Bankruptcy ~~cases~~Court. The New Plan provides for, ~~the~~among ~~Debtor’s~~other ~~trade~~things, ~~creditors~~the ~~and~~elimination ~~vendors~~of ~~are~~approximately ~~being~~$2.4 ~~paid~~billion inof ~~full~~previously existing debt in ~~the~~exchange ~~ordinary~~for ~~course~~a combination of ~~business~~cash, debt and ~~all~~new equity. Existing shareholders of the Company’s ~~contracts~~will ~~have~~not ~~remained~~receive ina ~~effect~~recovery inunder ~~accordance with their terms preserving~~ the ~~rights~~New ~~of all parties~~Plan.

~~For~~On ~~additional~~April ~~discussion~~21, of2017, ~~the~~following ~~Bankruptcy~~further ~~cases~~discussions ~~and~~with ~~its~~the ~~effects~~Secured Lenders, ~~See~~the ~~Part~~Company ~~1, Note~~filed 1an ~~-“Organization,~~amendment ~~Current~~to ~~Events~~the New Plan and ~~Basis~~a ofrelated ~~Presentation”~~disclosure ~~contained~~statement inwith ~~this~~the ~~Quarterly~~Bankruptcy ~~Report~~Court. onThis ~~Form~~amendment ~~10-Q~~makes ~~and~~certain ~~Part~~modifications Ito the New Plan, ~~Item~~among 1Aother changes, ~~“Risk~~to: ~~Factors~~(i) -no ~~Risk~~longer ~~Factors~~seek ~~Related~~approval toof ~~Our~~the ~~Restructuring”~~Noble inSettlement ~~our~~Agreement ~~Annual~~(as ~~Report~~defined onbelow); ~~Form~~(ii) ~~10-K~~provide for ~~the~~a ~~year~~combined ~~ended~~class ~~December~~of 31general unsecured creditors, ~~2015~~including the Company’s 6..75% senior unsecured notes maturing July 2022

~~Acquisition of Prospector Offshore Drilling~~ 34

The Prospector Acquisition expanded and enhanced our global fleet by adding two high specification jackups (the Prospector 1 and Prospector 5) contracted to Total S.A. for use in the U.K. sector of the North Sea. Additionally, three subsidiaries

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ofand ~~Prospector~~7.25% ~~contracted~~senior ~~for~~unsecured ~~the~~notes ~~construction~~maturing ofAugust ~~three~~2024; ~~high-specification jackup rigs, the Prospector 6, Prospector 7~~ and ~~Prospector 8~~ (~~collectively, the “Three High-Spec Jackups Under Construction”~~iii) byprovide ~~Shanghai~~for ~~Waigaoqiao Ship Co. Ltd. (“SWS”) in China. In April 2016, we agreed with SWS to an extension of~~ the ~~delivery~~post-emergence ofwind-down ~~the Prospector 6, Prospector 7 and Prospector 8 to the second quarter~~ of ~~2017,~~certain ~~the fourth quarter~~ of ~~2016 and~~ the ~~fourth~~Debtors’ ~~quarter~~dormant of 2017, respectively. We are currently in discussions with SWS to further extend each of these delivery dates and have agreed in principle regarding these extensions, but such extensions remain subject to documentation. Each newbuild has been built pursuant to a contract between one of these subsidiaries and ~~SWS,~~discontinued ~~without our parent company guarantee or other direct recourse to any of our subsidiaries other than the applicable subsidiary~~businesses. ~~The~~ ~~Prospector subsidiaries were not included in the Bankruptcy cases.~~

On ~~July~~May 242, ~~2015~~2017, weas ~~executed~~ a ~~combined~~result ~~$300~~of ~~million~~a ~~Sale~~successful court-~~Leaseback~~ordered ~~Transaction~~mediation process with ~~subsidiaries~~representatives of ~~SinoEnergy (collectively,~~ the ~~“Lessors”)~~Secured ~~for~~Lenders ~~our two high specification jackup units, Prospector 1~~ and ~~Prospector~~the ~~5 (collectively~~Bondholders, the ~~“Prospector~~Company ~~Rigs”). We~~filed ~~sold~~further ~~the~~amendments ~~Prospector Rigs~~ to the ~~Lessors~~New ~~and~~Plan ~~immediately leased the Prospector Rigs from the Lessors for a period of five years pursuant to a lease agreement for each Prospector Rig~~ (~~collectively,~~ the ~~“Lease~~Consensual ~~Agreements”~~Plan)~~. Net~~ ~~of fees~~ and ~~expenses~~a ~~and~~related ~~certain~~disclosure ~~lease~~statement ~~prepayments, we received net proceeds of approximately $292 million, including amounts used to fund certain required reserve accounts. The Prospector 5 is currently operating under drilling contracts~~ with ~~Total~~the ~~S.A.~~Bankruptcy ~~until November 2017~~Court. The ~~Prospector~~Consensual 1Plan ~~ended~~resolves ~~its~~the ~~contract~~objections ~~with~~previously ~~Total~~raised ~~S.A.~~by ~~in mid-September 2016. Under~~ the ~~terms~~Bondholders ofto the ~~Lease~~New ~~Agreements, we must obtain a new drilling contract for each rig within 180 days of the prior drilling contract expiring~~Plan. The ~~See~~Consensual ~~Part~~Plan ~~II,~~will ~~Item~~be ~~1A,~~subject ~~“Risk~~to ~~Factors~~usual -and Ifcustomary weconditions ~~are unable~~ to ~~obtain~~plan aconfirmation, ~~contract~~including ~~for~~obtaining the ~~Prospector~~requisite 1vote ~~on or before March 17, 2017, we will create an event~~ of ~~default~~creditors ~~under~~and ~~both~~approval of the ~~Lease~~Bankruptcy ~~Agreements~~Court.”

Since filing the Bankruptcy cases, the Debtors have operated their business as “debtors-in-possession”. Under the Bankruptcy cases, the Debtor’s trade creditors and vendors are being paid in full in the ordinary course of business.

For additional discussion of the Bankruptcy cases and its effects, See Part 1, Note 1 -“Organization, Current Events and Basis of Presentation” contained in this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors - Risk Factors Related to Our Restructuring” in our Annual Report on Form 10-K for the year ended December 31, 2016.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. Our ability to continue as a going concern is contingent upon obtaining the requisite vote of creditors and the Bankruptcy Court’s approval of our plan of reorganization as described below. This represents a material uncertainty related to events and conditions that raises substantial doubt on our ability to continue as a going concern and, therefore, we may be unable to utilize our assets and discharge our liabilities in the normal course of business.

Contract Drilling Services Backlog

We maintain a backlog (as defined below) of commitments for contract drilling services. The following table includes, as of ~~September~~March 3031, ~~2016~~2017, the amount of our contract drilling services backlog and the percent of available operating days committed for the periods indicated:

	For the Years Ending December 31,
(Dollars in millions)	Total		~~2016~~2017			~~2017~~2018			~~2018~~			~~2019~~
Floaters (1)	$	2	$	2		$	—		$	—		$	—
Drilling service backlog	$	183	$	156		$	27
Jackups	363		71			238			52			2
Percent of available days committed (1)			22		%	6		%
Total	$	365	$	73		$	238		$	52		$	2
Percent of available days committed (2)			23		%	18		%	6		%	—		%

(1) ~~Our~~Percent ~~backlog~~ of ~~commitments~~available ~~for~~days ~~contract~~committed ~~drilling~~is ~~for~~calculated ~~our~~by ~~floaters~~dividing asthe oftotal ~~September~~number ~~30,~~of ~~2016~~days ~~excludes~~our ~~approximately~~rigs ~~$143~~are ~~million~~operating ofunder ~~backlog~~contract for such period, or committed days, by the ~~Paragon~~product ~~DPDS3~~of ~~related~~the tototal ~~our~~number ~~contract~~of ~~with~~our ~~Petrobras.~~rigs, ~~Petrobras~~including ~~has~~cold-stacked ~~contested~~rigs, and the ~~term~~number of ~~our~~calendar ~~drilling~~days ~~contract~~in ~~for~~such ~~the~~period. ~~Paragon~~Committed ~~DPDS3~~days indo ~~connection~~not ~~with~~include the ~~length~~days ofthat ~~prior~~a ~~shipyard~~rig ~~projects~~is ~~relating~~stacked toor the days that a rig is expected to be out of service for significant overhaul repairs or maintenance.

~~(2)~~Our ~~Percent~~contract ofdrilling ~~available~~services ~~days~~backlog ~~committed~~typically isreflects ~~calculated~~estimated byfuture ~~dividing~~revenues ~~the~~attributable ~~total~~to ~~number~~both ofsigned ~~days~~drilling ~~our~~contracts ~~rigs~~and ~~are~~letters ~~operating~~of ~~under~~intent ~~contract~~that ~~for~~we ~~such~~expect ~~period,~~to orrealize. ~~committed~~A ~~days,~~letter ~~by the product~~ of ~~the~~intent ~~total~~is ~~number~~generally ofsubject ~~our~~to ~~rigs~~customary conditions, including ~~cold-stacked~~the ~~rigs,~~execution ~~and~~of ~~the~~a ~~number~~definitive ofdrilling ~~calendar~~contract. ~~days~~It inis ~~such~~possible ~~period.~~that ~~Committed~~some ~~days~~customers dothat ~~not~~have ~~include~~entered ~~the~~into ~~days~~letters ~~that~~of aintent ~~rig~~will isnot ~~stacked~~enter orinto ~~the~~signed ~~days~~drilling ~~that~~contracts. As aof ~~rig~~March 31, is2017, ~~expected~~our tocontract bedrilling ~~out~~services ofbacklog ~~service~~did ~~for~~not ~~significant~~include ~~overhaul~~any ~~repairs~~letters orof ~~maintenance~~intent.

Our contract drilling services backlog typically reflects estimated future revenues attributable to both signed drilling contracts and letters of intent that we expect to realize. A letter of intent is generally subject to customary conditions, including the execution of a definitive drilling contract. It is possible that some customers that have entered into letters of intent will not enter into signed drilling contracts. As of September 30, 2016, our contract drilling services backlog did not include any letters of intent. 35

We calculate backlog for any given rig and period by multiplying the full contractual operating dayrate for such rig by the number of days remaining in the period. The reported contract drilling services backlog does not include amounts representing revenues for mobilization, demobilization and contract preparation, which are not expected to be significant to our contract drilling services revenues, amounts constituting reimbursables from customers or amounts attributable to uncommitted option periods under drilling contracts.

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Petrobras has contested the term of each of our drilling contracts for the Paragon DPDS2 and the Paragon DPDS3 in connection with the length of prior shipyard projects relating to these rigs and released the Paragon DPDS2 effective September 29, 2015. Under our interpretation of the contract, the Paragon DPDS3 was scheduled to work until August 2017. However, in accordance with Petrobras’ interpretation of the contract, the Paragon DPDS3 was released in August 2016. Both rigs are currently stacked in a shipyard in Puerto Rico and Paragon is winding down its operational presence in Brazil. Backlog related to this dispute is not included in our reported backlog as of March 31, 2017. Paragon will vigorously pursue all legal remedies available to us under these contracts.

Subsequent to March 31, 2017, Paragon signed drilling contracts for the Paragon B152, Dhabi II, and the Paragon MSS1. Backlog related to these drilling contracts of approximately $87 million is not included in our reported backlog as of March 31, 2017.

The amount of actual revenues earned and the actual periods during which revenues are earned may be materially different than the backlog amounts and backlog periods set forth in the table above due to various factors, including, but not limited to, shipyard and maintenance projects, unplanned downtime, achievement of bonuses, weather conditions and other factors that result in applicable dayrates lower than the full contractual operating dayrate. In addition, amounts included in the backlog may change because drilling contracts may be varied or modified by mutual consent or customers may exercise early termination rights contained in some of our drilling contracts or decline to enter into a drilling contract after executing a letter of intent. As a result, our backlog as of any particular date may not be indicative of our actual revenues for the periods for which the backlog is calculated.

3536

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RESULTS OF OPERATIONS

For the Three Months Ended ~~September~~March 3031, ~~2016~~2017 and ~~2015~~2016

Net loss for the three months ended ~~September~~March 3031, ~~2016~~2017 was $6470 million, or a loss of $0.7279 per diluted share, on operating revenues of $~~125~~57 million, compared to a net loss for three months ended ~~September~~March 3031, ~~2015~~2016 of $~~1,085~~5 million, or a loss of $120.4606 per diluted share, on operating revenues of $~~369~~265 million.

Average Rig Utilization, Operating Days and Average Dayrates

Operating results for our contract drilling services segment are dependent on two primary metrics: rig utilization and dayrates. The following table includes the average rig utilization, operating days and average dayrates for our rig fleet for the three months ended ~~September~~March 3031, ~~2016~~2017 (the “Current Quarter”) and for the three months ended ~~September~~March 3031, ~~2015~~2016 (the “Comparable Quarter”):

	Average Rig Utilization (1)				Operating Days (2)				Average Dayrates
	Three Months Ended				Three Months Ended				Three Months Ended
	September 30,				September 30,		Change		September 30,				Change
	March 31,				March 31,		Change		March 31,				Change
	2016		2015		2016	2015	%		2016		2015		%
	2017		2016		2017	2016	%		2017		2016		%
Jackups	3221	%	6048	%	~~1,001~~632	1,~~891~~491	(4758	)%	$	9887,~~824~~375	$	~~116~~113,~~071~~885	(1523	)%
Floaters	13—	%	8345	%	74—	~~459~~246	(84100	)%	~~241,379~~—		~~259~~264,~~844~~779		(7100	)%
Total	2918	%	6448	%	~~1,075~~632	21,~~350~~737	(5464	)%	$	~~108~~87,~~574~~375	$	~~144~~135,~~158~~296	(2535	)%


(1)	We define utilization for a specific period as the total number of days our rigs are operating under contract, divided by the product of the total number of our rigs, including cold-stacked rigs, and the number of calendar days in such period. Information reflects our policy of reporting on the basis of the number of available rigs in our fleet.


(2)	Information reflects the number of days that our rigs were operating under contract.

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Operating Results

The following table sets forth our operating results for the three months ended ~~September~~March 3031, ~~2016~~2017 and ~~2015~~2016:

	Three Months Ended
	September 30,						Change
	March 31,						Change
(Dollars in thousands)	~~2016~~2017			~~2015~~2016			$			%
Operating revenues
Contract drilling services	$	~~116~~55,~~674~~247		$	~~338~~235,~~710~~044		$	(~~222~~179,~~036~~797	)	(6676	)%
Labor contract drilling services	~~4,517~~—			6,~~853~~748			(26,~~336~~748		)	(34100	)%
Reimbursables and other	32,~~887~~196			23,~~410~~328			(1921,~~523~~132		)	(8391	)%
	125,078			368,973			(243,895		)	(66	)%
	57,443			265,120			(207,677		)	(78	)%
Operating costs and expenses
Contract drilling services	$	8549,~~109~~592		$	~~190~~112,~~536~~706		$	(~~105~~63,~~427~~114	)	(5556	)%
Labor contract drilling services	~~4,966~~14			45,~~792~~059			~~174~~(5,045		)	4(100	)%
Reimbursables	21,~~778~~576			19,~~517~~784			(1618,~~739~~208		)	(8692	)%
Depreciation and amortization	5030,~~270~~575			9571,~~826~~906			(4541,~~556~~331		)	(4857	)%
General and administrative	118,~~464~~723			12,~~800~~174			(13,~~336~~451		)	(1028	)%
Loss on impairments	—391			~~1,150,846~~—			~~(1,150,846~~391		)	**
	154,587			1,474,317			(1,319,730		)	(90	)%
	90,871			221,629			(130,758		)	(59	)%
Operating loss	$	(2933,~~509~~428	)	$	(143,~~105,344~~491	)	$	1(76,~~075,835~~919	)	(97177	)%

** Not a meaningful percentage

Contract Drilling Services Operating Revenues—Changes in contract drilling services revenues for the Current Quarter as compared to the Comparable Quarter resulted from a 5464% decrease in operating days which negatively impacted revenues by $~~203~~163 million. This was coupled with a 2535% decrease in average dayrates, which resulted in a $1917 million decrease in revenues from the Comparable Quarter.

The decrease in contract drilling services revenues was attributable to both our floaters and jackups, which experienced decreases of $~~102~~65 million and $~~120~~115 million, respectively, in the Current Quarter as compared to the Comparable Quarter.

The decrease in floater revenues of $~~102~~65 million in the Current Quarter was driven by an 84100% decrease in operating days ~~and a 7% decrease in average dayrates~~, ~~which resulted in a $100 million decrease and a $2 million decrease in revenues, respectively,~~ from the Comparable Quarter.

The decrease in operating days for our floaters was primarily attributable to Paragon MDS1, Paragon MSS2 and Paragon DPDS2, which were uncontracted for all of the Current Quarter but experienced full or partial utilization in India and Brazil, in the Comparable Quarter. ~~Paragon~~ MSS1 and Paragon DPDS3 also experienced a decrease in operating days in the North Sea and Brazil, respectively, in the Current Quarter as compared to the Comparable Quarter. We experienced an overall decrease in dayrates across our floater fleet.

The $~~120~~115 million decrease in jackup revenues in the Current Quarter was driven by a 4758% decrease in operating days which resulted in a $~~103~~98 million decrease in revenues from the Comparable Quarter. This was coupled with a 1523% decrease in average dayrates, which resulted in a $17 million decrease in revenues from the Comparable Quarter.

The decrease in jackup operating days was primarily related to Paragon M825 ~~and Paragon L782~~ in West Africa, Paragon ~~B391~~C20051, Paragon C461 and Paragon C463 in the North Sea, and Paragon ~~M842~~L784 ~~in Mexico~~ and Paragon ~~L1115~~M1162 in the Middle East, which were uncontracted for all of the Current Quarter but experienced full utilization during the Comparable Quarter. The remaining decrease in operating days is due to Paragon M826 ~~and Paragon L783~~ in West Africa, Paragon C20052, Paragon HZ1, ~~Paragon C462~~ and ~~Prospector~~Paragon 1B391 in the North Sea, ~~Paragon L784 in the Middle East~~ and Paragon M824 ~~and Paragon M841~~ in Mexico which were uncontracted for a portion of the Current Quarter but were contracted for all or a greater portion of the Comparable Quarter. ~~The~~ ~~decrease in operating days was partially offset by 92 additional operating days in the Current Quarter attributable to Noble Ed Holt operating in India in the Current Quarter.~~

37The decrease in jackup average dayrates during the Current Quarter was due to an overall decrease in dayrates across our fleet.

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~~The~~Contract ~~decrease~~Drilling inServices ~~jackup~~Operating ~~average~~Costs ~~dayrates~~and ~~during~~Expenses ~~the~~— ~~Current~~Contract ~~Quarter~~drilling ~~was~~services ~~due~~operating tocosts anand ~~overall~~expenses ~~decrease~~decreased $63 million in ~~dayrates~~the ~~across~~Current ~~our~~Quarter ~~fleet. The~~as ~~decrease~~compared into ~~average~~the ~~dayrates~~Comparable ~~was~~Quarter ~~offset~~due byto ~~the~~reduced ~~realization~~operating ofdays aacross ~~higher~~our ~~average~~fleet ~~dayrate~~as onwell ~~Prospector~~as 5cost ~~operating~~reduction ininitiatives ~~the~~implemented ~~North~~across ~~Sea~~our operations.

Contract Drilling Services Operating Costs and Expenses — Contract drilling services operating costs and expenses decreased $105 million in the Current Quarter as compared to the Comparable Quarter due to reduced operating days across our fleet as well as cost reduction initiatives implemented across our operations.

Labor Contract Drilling Services Operating Revenues and Costs and Expenses — The decline in revenues associated with our Canadian labor contract drilling services was primarily related to the termination of labor contract with Hibernia Management and Development Ltd. in June 2016. Expenses associated with our labor contract drilling services remained relatively constant.

Reimbursables Operating Revenues and Costs and Expenses — We record reimbursements from customers for out-of-pocket expenses as operating revenues and the related direct costs as operating expenses. Margin on our reimbursables increased in the Current Quarter primarily related to a greater portion of our reimbursables attributable to catering services. Changes in the amount of these reimbursables generally do not have a material effect on our financial position, results of operations or cash flows.

Depreciation and Amortization — The $4641 million decrease in depreciation and amortization in the Current Quarter was primarily attributable to lower depreciation on assets subject to the impairment charges taken in the ~~third and~~ fourth ~~quarters~~quarter of ~~2015~~2016.

General and Administrative — General and administrative expenses decreased $13 million in the Current Quarter as compared to the Comparable Quarter primarily due to cost reduction initiatives implemented across the Company as a result of reduced operations.

Loss on Impairment - In the Comparable Quarter, as a result of the identification of certain indicators of impairment, we performed an impairment assessment of our rig fleet and resultantly recorded an impairment loss of $1.1 billion on five floaters, sixteen jackups and deposits related to the Three High-Spec Jackups Under Construction. In addition, we determined goodwill was impaired and recorded an impairment loss of $37 million during the Comparable Quarter.

Other Expenses

Income tax provision — Our income tax provision increased $572 million in the Current Quarter compared to the Comparable Quarter, primarily related to the underlying changes in the profitability/loss associated with our operations in various jurisdictions and certain discrete tax items.

Reorganization items, net — The Company uses “Reorganization items, net” to reflect the net revenues, expenses, gains and losses that are the direct result of the reorganization of the business. Reorganization items of $1718 million and $22 million for the three months ended March 31, 2017 and 2016, respectively, primarily relate to professional fees for legal and financial advisors incurred in connection with preparation and handling of the Bankruptcy cases. (See Note 9, “Reorganization Items” for additional detail).

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For the Nine Months Ended September 30, 2016 and 2015

Net loss for the nine months ended September 30, 2016 was $94 million, or a loss of $1.08 per diluted share, on operating revenues of $575 million, compared to a net loss for nine months ended September 30, 2015 of $976 million, or a loss of $11.39 per diluted share, on operating revenues of $1.2 billion.

Average Rig Utilization, Operating Days and Average Dayrates

Operating results for our contract drilling services segment are dependent on two primary metrics: rig utilization and dayrates. The following table includes the average rig utilization, operating days and average dayrates for our rig fleet for the nine months ended September 30, 2016 (the “Current Period”) and for the nine months ended September 30, 2015 (the “Comparable Period”):

	Average Rig Utilization (1)				Operating Days (2)				Average Dayrates
	Nine Months Ended				Nine Months Ended				Nine Months Ended
	September 30,				September 30,		Change		September 30,				Change
	2016		2015		2016	2015	%		2016		2015		%
Jackups	39	%	65	%	3,618	6,054	(40	)%	$	109,133	$	122,327	(11	)%
Floaters	25	%	83	%	416	1,364	(70	)%	291,598		264,665		10	%
Total	37	%	68	%	4,034	7,418	(46	)%	$	127,948	$	148,499	(14	)%

(1) We define utilization for a specific period as the total number of days our rigs are operating under contract, divided by the product of the total number of our rigs, including cold-stacked rigs, and the number of calendar days in such period. Information reflects our policy of reporting on the basis of the number of available rigs in our fleet.

(2) Information reflects the number of days that our rigs were operating under contract.

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Operating Results

The following table sets forth our operating results for the nine months ended September 30, 2016 and 2015:

	Nine Months Ended
	September 30,					Change
(Dollars in thousands)	2016		2015			$			%
Operating revenues
Contract drilling services	$	516,182	$	1,101,618		$	(585,436	)	(53	)%
Labor contract drilling services	16,750		21,224			(4,474		)	(21	)%
Reimbursables and other	42,201		70,023			(27,822		)	(40	)%
	575,133		1,192,865			(617,732		)	(52	)%
Operating costs and expenses
Contract drilling services	$	289,446	$	612,610		$	(323,164	)	(53	)%
Labor contract drilling services	14,218		16,086			(1,868		)	(12	)%
Reimbursables	35,870		58,173			(22,303		)	(38	)%
Depreciation and amortization	181,732		280,574			(98,842		)	(35	)%
General and administrative	33,459		41,901			(8,442		)	(20	)%
Loss on impairments	—		1,152,547			(1,152,547		)	**
Gain on sale of assets, net	—		(12,717		)	12,717			**
Gain on repurchase of long-term debt	—		(4,345		)	4,345			**
	554,725		2,144,829			(1,590,104		)	(74	)%
Operating income (loss)	$	20,408	$	(951,964	)	$	972,372		(102	)%

** Not a meaningful percentage

Contract Drilling Services Operating Revenues—Changes in contract drilling services revenues for the Current Period as compared to the Comparable Period were driven by a 46% decrease in operating days which negatively impacted revenues by $549 million. This was coupled with a 14% decrease in average dayrates which decreased revenues by $37 million.

The decrease in contract drilling services revenues was attributable to both our floaters and jackups, which experienced decreases of $240 million and $346 million, respectively, in the Current Period as compared to the Comparable Period.

The decrease in floater revenues of $240 million in the Current Period was driven by a 70% decrease in operating days partially offset by a 10% increase in average dayrates which resulted in a $251 million decrease and a $11 million increase in revenues, respectively, from the Comparable Period.

The decrease in operating days for our floaters was primarily attributable to Paragon MDS1 and Paragon DPDS2, which were uncontracted for all of the Current Period but experienced full utilization in India and Brazil, respectively, in the Comparable Period. Paragon MSS1, Paragon MSS2 and Paragon DPDS3 also experienced a decrease in operating days in the North Sea, Brazil and Brazil, respectively, in the Current Period as compared to the Comparable Period. The overall increase in average dayrates in the Current Period resulted from additional revenue earned for unused shipyard days upon contract completion of Paragon MSS2 in the second quarter of 2016.

The $346 million decrease in jackup revenues in the Current Period was driven by a 40% decrease in jackup operating days which resulted in a $298 million decrease in revenues. This was coupled with a 11% decrease in average dayrates which resulted in decreased revenues of $48 million from the Comparable Period.

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The decrease in jackup operating days was primarily related to Paragon L782 in West Africa and Paragon L1115 in the Middle East, which were uncontracted for all of the Current Period but experienced full utilization during the Comparable Period. The decrease in operating days is also related to the rigs operating in Mexico, Paragon M841, Paragon M824, Paragon B301, Paragon L1113, Paragon L781, Paragon M842, and Paragon M821 which were uncontracted for a portion of the Current Period but were contracted for all or a greater portion of the Comparable Period. The remaining decrease in operating days is due to Paragon L785 operating in Southeast Asia, Paragon M825 and Paragon L783 operating in West Africa, Dhabi II operating in the Middle East, and Paragon C462, Paragon C463, Paragon C20051, Paragon HZ1, Paragon B391, Paragon C20052 and Prospector 1 operating in the North Sea which were uncontracted for a portion of the Current Period but were contracted for all or a greater portion of the Comparable Period. The decrease in operating days was partially offset by 321 additional operating days in the Current Period attributable to Paragon L784, Paragon M1161 and Paragon L786 operating in the Middle East and 169 additional operating days in the Current Period attributable to Noble Ed Holt operating in India.

The decrease in jackup average dayrates during the Current Period was due to an overall decrease in dayrates across our fleet. The decrease in average dayrates was offset by the realization of higher dayrates on contracts for Paragon M842 operating in Mexico, Paragon M826 in West Africa and Prospector 5 operating in the North Sea.

Contract Drilling Services Operating Costs and Expenses — Contract drilling services operating costs and expenses decreased $323 million in the Current Period as compared to the Comparable Period was due to reduced operating days across our fleet as well as cost reduction initiatives implemented across our operations.

Labor Contract Drilling Services Operating Revenues and Costs and Expenses — The decline in revenues and expenses associated with our Canadian labor contract drilling services was primarily related to the termination of labor contract with Hibernia Management and Development Ltd. in June 2016.

Reimbursables Operating Revenues and Costs and Expenses — Margin on our reimbursable remained relatively constant. We record reimbursements from customers for out-of-pocket expenses as operating revenues and the related direct costs as operating expenses. Changes in the amount of these reimbursables generally do not have a material effect on our financial position, results of operations or cash flows.

Reimbursables in both the Current Period and Comparable Period include the services we provided to Noble in Brazil, on a cost-plus basis, as part of the Transition Services Agreement entered into in connection with the Spin-Off. We provided both rig-based and shore-based support services to Noble through the term of Noble’s rig contract pursuant to the transition service agreement for Brazil. Noble’s contract in Brazil and the services provided by us concluded in the second quarter of 2016 (See Note 16,“Commitments and Contingencies” for additional detail).

Depreciation and Amortization — The $99 million decrease in depreciation and amortization in the Current Period was primarily attributable to lower depreciation on assets subject to the impairment charges taken in the third and fourth quarters of 2015.

General and Administrative — General and administrative expenses decreased $8 million in the Current Period as compared to the Comparable Period primarily due to cost reduction initiatives implemented across the Company.

Loss on Impairment - In the Comparable Period, as a result of the identification of certain indicators of impairment, we performed an impairment assessment of our rig fleet and resultantly recorded an impairment loss of $1.1 billion on five floaters, sixteen jackups and deposits related to the Three High-Spec Jackups Under Construction. In addition, we determined goodwill was impaired and recorded an impairment loss of $37 million during the Comparable Period.

Gain on sale of assets — Gain on sale of assets during the Comparable Period was attributable to the sale of the Paragon M822 to an unrelated third party during the first quarter of 2015 partially offset by a loss on the sale of drill pipe during the second quarter of 2015.

Gain on repurchase of long-term debt — In the Comparable Period, we repurchased and canceled an aggregate principal amount of $11 million of our senior notes at an aggregate cost of $7 million including accrued interest. As a result of the repurchases, we recognized a total gain on debt retirement, net of the write-off of issuance costs, of approximately $4 million in the Comparable Period.

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Other Expenses

Income tax provision — Our income tax provision increased $68 million in the Current Period compared to the Comparable Period, primarily related to the underlying changes in the profitability/loss associated with our operations in various jurisdictions and certain discrete tax items.

Reorganization items, net — The Company uses “Reorganization items, net” to reflect the net revenues, expenses, gains and losses that are the direct result of the reorganization of the business. Reorganization items of $57 million in the Current Period primarily relate to professional fees for legal and financial advisors incurred in connection with preparation and handling of the Bankruptcy cases. During the nine months ended September 30, 2016, the Company paid cash of approximately $31 million for reorganization items. (See Note 9, “Reorganization Items” for additional detail).

Non-GAAP Performance Measure: Adjusted EBITDA

Item 10(e) of Regulation S-K, Regulation G, General Rules Regarding Disclosure of Non-GAAP Financial Measures and other SEC rules, regulations and interpretations define and prescribe the conditions for use of certain Non-Generally Accepted Accounting Principles (“Non-GAAP”) financial measures. We use the Non-GAAP measure Adjusted EBITDA. We define Adjusted EBITDA as net income (loss) before taxes plus interest expense, depreciation and amortization, losses on impairments, foreign currency losses and reorganization items, less gains on the sale of assets, interest income and foreign currency gains. Adjusted EBITDA, as used and defined by us, may not be comparable to similarly titled measures employed by other companies and is not a measure of performance calculated in accordance with U.S. GAAP. Adjusted EBITDA should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by or used in operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with U.S. GAAP. However, we believe Adjusted EBITDA is useful to an investor in evaluating our operating performance because this measure: (1) is used by investors in our industry to measure a company’s operating performance without regard to items excluded from the calculation of such term, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors; (2) helps investors and creditors to more meaningfully evaluate and compare the results of our operations from period to period by removing the effect of certain non-recurring transactions, our capital structure and asset base from its operating structure; and (3) is used by our management as a basis for strategic planning and forecasting. There are significant limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the effect of certain recurring and non-recurring items that materially affect our net income or loss, and the lack of comparability of results of operations of different companies.

The reconciliation from net loss to Adjusted EBITDA is as follows:

	Three Months Ended						~~Nine Months Ended~~
	September 30,						September 30,
	March 31,
(in thousands)	~~2016~~2017			~~2015~~2016			~~2016~~			~~2015~~
Net loss	$	(6370,~~618~~416	)	$	(15,~~084,838~~210	)	$	~~(93,937~~	)	$	~~(976,380~~	)
Adjustments:
Depreciation and amortization	5030,~~270~~575			9571,~~826~~906			~~181,732~~			~~280,574~~
Loss on impairments	—391			~~1,150,846~~—			—			~~1,152,547~~
(Gain) on sale of assets, net	—			—			—			(12,717		)
Interest expense, net	17,916			27,017
(Gain) on repurchase of long-term debt	—			—			—			(4,345		)
Other, net	(1,751		)	(762		)
Interest expense, net	18,446			33,900			58,299			93,107
Reorganization items, net	18,474			21,842
Other, net	(2,804		)	983			(1,512		)	(1,421		)
Income tax provision	2,349			604
Reorganization items, net	17,211			—			56,602			—
Adjusted EBITDA	$	(2,462	)	$	115,397
Income tax (benefit) provision	1,256			(55,389		)	956			(67,301		)
Adjusted EBITDA	$	20,761		$	141,328		$	202,140		$	464,064

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LIQUIDITY AND CAPITAL RESOURCES

Going Concern

The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. Our ability to continue as a going concern is contingent upon our development of a plan of reorganization, approval of the plan by the Bankruptcy Court and our creditors, and our ability to successfully implement a plan of reorganization. This represents a material uncertainty related to events and conditions that raises substantial doubt on our ability to continue as a going concern and, therefore, we may be unable to realize our assets and discharge our liabilities in the normal course of business.

Financial Resources and Liquidity Overview

Our primary sources of liquidity are cash generated from operations, any future financing arrangements, and equity issuances, subject to the restrictions in our Debt Facilities. Our principal uses of liquidity will be to fund our operating expenditures and capital expenditures, including major projects, upgrades and replacements to drilling equipment and to service our outstanding indebtedness.

As of ~~September~~March 3031, ~~2016~~2017, we had available liquidity in cash and cash equivalents of $~~880~~833 million.

The table below includes a summary of our cash flow information for the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017 and ~~2015~~2016:

	Nine Months Ended
	September 30,
(In thousands)	2016			2015
Cash flows provided by (used in):
Operating activities	$	244,636		$	386,751
Investing activities	(79,079		)	(158,687		)
Financing activities	(59,165		)	448,124

Changes in cash flows from operating activities for the nine months ended September 30, 2016 are driven by the overall decrease in our business activity (see discussion of changes in net loss in “Results of Operations” above). Changes in cash flows used in investing activities are dependent upon our level of capital expenditures, which varies based on the timing of projects. Cash used for capital expenditures totaled $45 million during the nine months ended September 30, 2016, as compared to $169 million during the same period of 2015. During the nine months ended September 30, 2016, our net cash from investing activities was impacted by an increase in restricted cash related to cash collateral for an outstanding performance bond and reserve requirements on the Sale-Leaseback Transaction. Changes in cash flows used in financing activities for the nine months ended September 30, 2016 are due to reduction of debt payment activity during the bankruptcy proceedings, except for repayments on our Sale-Leaseback Transaction.

Our currently anticipated cash flow needs, both in the short-term and long-term, may include the following:

• normal recurring operating expenses;

• committed capital expenditures;

• discretionary capital expenditures, including various capital upgrades; and

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• service of outstanding indebtedness, including mandatory pre-payments.



	Three Months Ended
	March 31,
(In thousands)	2017			2016
Cash flows provided by (used in):
Operating activities	$	(35,978	)	$	106,323
Investing activities	(4,417		)	(27,448		)
Financing activities	(10,823		)	(17,045		)

Changes in cash flows from operating activities for the three months ended March 31, 2017 are driven by the overall decrease in our business activity (see discussion of changes in net loss in “Results of Operations” above). Changes in cash flows used in investing activities are dependent upon our level of capital expenditures, which varies based on the timing of projects. Cash used for capital expenditures totaled $3 million during the three months ended March 31, 2017, as compared to $23 million during the same period of 2016. During the three months ended March 31, 2017, our net cash from investing activities was impacted by an increase in restricted cash related to reserve requirements on the Sale-Leaseback Transaction. Cash used in financing activities for the three months ended March 31, 2017 are due to repayments on our Sale-Leaseback Transaction.

Our currently anticipated cash flow needs, both in the short-term and long-term, may include the following:

•normal recurring operating expenses;

•committed capital expenditures;

•discretionary capital expenditures, including various capital upgrades;

•capital expenditures for the reactivation of stacked rigs upon securing an acceptable drilling contract; and

•service of outstanding indebtedness, including mandatory pre-payments.

We currently expect to fund these cash flow needs with cash generated by our operations, available cash balances, or asset sales as allowed under our credit agreements.

Revolving Credit Facility, Term Loan Facility and Senior Notes

See Part 1, Note 7 -“Debt” for descriptions of our debt instruments.

InAs of December 2015, we drew down substantially all of the available borrowing capacity under our Revolving Credit Facility to preserve liquidity. On January 15, 2016 we elected to defer an interest payment of approximately $15 million due on our 6.75% senior unsecured notes maturing July 2022, and to operate under the 30-day grace period provided for in the notes indenture. We utilized the 30-day grace period to continue negotiations with our stakeholders and prepare for an in-court restructuring. Accordingly, under the direction of an independent committee of our Board of Directors, on February 12, 2016, wethe Debtors entered into the ~~PSA~~Original ~~relating to a plan of reorganization~~Plan.

On February 1214, 2016, the Debtors ~~entered~~filed ~~into a plan support agreement (~~the ~~“PSA”)~~Bankruptcy ~~relating~~cases. The tocommencement ~~a plan~~ of ~~reorganization (~~the ~~“Plan”) pursuant to chapter 11 of the~~ Bankruptcy ~~Code~~cases ~~with~~constituted ~~holders (the “Noteholder Group”) representing~~ an ~~aggregate~~event of ~~77%~~default ofthat ~~the~~accelerated ~~outstanding $457 million of~~ our ~~6.75%~~obligations ~~senior~~under ~~unsecured~~the ~~notes~~Term ~~maturing~~Loan ~~July~~Agreement, ~~2022~~Revolving ~~(the~~Credit ~~“2022~~Agreement, and Senior Notes”). Any ~~and~~efforts ~~the~~to ~~outstanding~~enforce ~~$527~~payments ~~million~~related ofto ~~our~~these ~~7.25%~~obligations ~~senior~~are ~~unsecured~~automatically ~~notes~~stayed ~~maturing~~as ~~August~~a ~~2024~~result (of the ~~“2024~~filing ~~Senior~~of ~~Notes”) together with lenders (~~the ~~“Revolver~~petitions ~~Group”)~~and ~~representing~~are ansubject ~~aggregate~~to ~~of 96% of~~ the ~~amounts~~applicable ~~outstanding~~provisions ~~(including letters~~ of ~~credit)~~the ~~under~~Bankruptcy ~~our Revolving Credit Agreement~~Code.

OnUpon ~~February~~filing ~~14, 2016,~~ the ~~Debtors filed voluntary petitions for relief under chapter 11 of the~~ Bankruptcy ~~Code~~cases, inwe ~~the~~began ~~Bankruptcy~~trading ~~Court~~on (the ~~“Bankruptcy~~OTC ~~cases”)~~Pink.

On April 619, 2016, the Bankruptcy Court approved the Company’s disclosure statement, ~~which~~and ~~included~~certain aamendments ~~revised~~to ~~plan~~the Original Plan.

OnEffective August 5, 2016, wethe ~~reached~~Company anentered ~~agreement~~into inthe ~~principle~~PSA Amendment with ~~an ad hoc committee of~~ the ~~holders~~Revolver ofLenders ~~our~~and ~~Senior~~lenders ~~Notes~~holding ~~(“Noteholders”)~~approximately ~~and~~69% ain ~~steering~~principal ~~committee~~amount of ~~the~~our ~~lenders~~Senior ~~under~~Notes. ~~the~~The ~~Revolving~~PSA ~~Credit~~Amendment ~~Facility~~supported ~~(“Revolver~~certain ~~Lenders”)~~revisions ~~for a proposed amendment~~ to the ~~PSA~~Original ~~(the~~Plan. On ~~“PSA~~August ~~Amendment”)~~15, ~~which among other things~~2016, ~~provides~~the ~~for~~Debtors anfiled ~~extension~~the ofamended ~~certain~~Original ~~milestone~~Plan ~~dates~~ and ~~contains~~a ~~amendments~~supplemental todisclosure ~~the~~statement ~~Plan~~with ~~and~~the ~~disclosure~~Bankruptcy ~~statement~~Court.

~~Additionally,~~By oral ruling on ~~August~~October 528, 2016, ~~the Debtors filed an amended~~ and ~~restated~~by ~~plan~~written oforder ~~reorganization~~dated ~~(the~~November ~~“Amended Plan”) and a supplemental disclosure statement (the “Supplemental Disclosure Statement”) with the Bankruptcy Court. On August 10~~15, 2016, the ~~Company~~Bankruptcy ~~received~~Court ~~signatures~~denied toconfirmation ~~the PSA amendment from 100%~~ of the ~~Revolver~~Debtors’ ~~Lenders~~amended Original Plan. ~~Together~~Consequently, ~~with~~on ~~the~~November ~~signatures~~29, ~~already~~2016, ~~received from~~ the ~~Noteholders~~Noteholder ofGroup ~~approximately~~terminated ~~69% in principal amount of our Senior Notes,~~ the PSA ~~Amendment became~~ effective as of ~~August~~December 52, 2016.

On October 28, 2016, the Bankruptcy Court issued an oral ruling denying confirmation of the Debtors’ Amended Plan. Paragon is currently evaluating its potential courses of action. As a result of the Bankruptcy Court not confirming the Debtors’ Amended Plan on or before October 31, 2016, the Noteholders and the Revolver Lenders each have the right to terminate the PSA upon three business days’ notice.41

~~For~~Table ~~additional discussion~~ of the risks associated with our indebtedness and current issues, see Part I, Item 1A, “Risk Factors - Risk Factors Related to Our Restructuring” in our Annual Report on Form 10-K for the year ended December 31, 2015.Contents

On January 18, 2017, the Company announced that it reached agreement in principle with a steering committee of lenders under our Revolving Credit Agreement and an ad hoc committee of lenders under our Term Loan Agreement to support a new chapter 11 plan of reorganization for the Debtors (the “New Plan”). On February 7, 2017, the Company filed the New Plan and related disclosure statement with the Bankruptcy Court. The New Plan provides for, among other things, the (i) elimination of approximately $2.4 billion of the Company’s existing debt in exchange for a combination of cash, debt and new equity to be issued under the New Plan; (ii) allocation to the Secured Lenders of new senior first lien debt in the original aggregate principal amount of $85 million maturing in 2022; (iii) projected distribution to the Secured Lenders of approximately $418 million in cash, subject to adjustment on account of claims reserves and working capital and other adjustments at the time of the Company’s emergence from the Bankruptcy cases, and an estimated 58% of the new equity of the reorganized company; (iv) projected distribution to the Bondholders of approximately $47 million in cash, subject to adjustment on account of claims reserves and working capital and other adjustments at the time of the Company’s emergence from the Bankruptcy cases, and an estimated 42% of the new equity of the reorganized company; and (v) commencement of an administration of the Company in the United Kingdom to, among other things, implement a sale of all or substantially all of the assets of the Company to a new holding company to be formed, which administration may be effected on or prior to effectiveness of the New Plan.

On April 21, 2017, following further discussions with the Secured Lenders, the Company filed an amendment to the New Plan and a related disclosure statement with the Bankruptcy Court. This amendment makes certain modifications to the New Plan, among other changes, to: (i) no longer seek approval of the Noble Settlement Agreement (as defined below); (ii) provide for a combined class of general unsecured creditors, including the Company’s 6.75% senior unsecured notes maturing July 2022 and 7.25% senior unsecured notes maturing August 2024; and (iii) provide for the post-emergence wind-down of certain of the Debtors’ dormant subsidiaries and discontinued businesses.

On May 2, 2017, as a result of a successful court-ordered mediation process with representatives of the Secured Lenders and the Bondholders, the Company filed additional amendments to the New Plan (as amended, the “Consensual Plan”) and a related disclosure statement with the Bankruptcy Court. The Consensual Plan resolves the objections previously raised by the Bondholders to the New Plan.

Under the Consensual Plan, approximately $2.4 billion of previously existing debt will be eliminated in exchange for a combination of cash and to-be-issued new equity. If confirmed, the Secured Lenders will receive their pro rata share of $410 million in cash and 50% of the new, to-be-issued common equity, subject to dilution. The Bondholders will receive $105 million in cash and an estimated 50% of the new, to-be-issued common equity, subject to dilution. The Secured Lenders and Bondholders will each appoint three members of a new board of directors to be constituted upon emergence of the Company from bankruptcy and will agree on a candidate for Chief Executive Officer who will serve as the seventh member of the board of directors of the Company. Certain other elements of the New Plan remain unchanged in the Consensual Plan, including that: (i) the Secured Lenders shall be allocated new senior secured first lien debt in the original aggregate principal amount of $85 million maturing in 2022, (ii) the Company shall commence an administration proceeding in the United Kingdom, and (iii) the Company’s current shareholders are not expected to have any recovery under the Consensual Plan. Both the U.S. Trustee and the Bankruptcy Court have declined to appoint an equity committee in the Bankruptcy cases. The Consensual Plan will be subject to usual and customary conditions to plan confirmation, including obtaining the requisite vote of creditors and approval of the Bankruptcy Court.

For additional discussion of the risks associated with our indebtedness and current issues, see Part I, Item 1A, “Risk Factors - Risk Factors Related to Our Restructuring” in our Annual Report on Form 10-K for the year ended December 31, 2016.

Meeting Our Liquidity Needs

We have ~~initiated~~maintained ~~actions designed to improve~~ our liquidity position by giving priority to generating cash flows, including cost and capital expenditure reductions, while maintaining our long-term commitment to providing high quality services. During the pendency of the Bankruptcy cases and upon emergence from bankruptcy, we expect that our primary sources of liquidity will continue to be cash on hand and cash flows from operations. In addition to the cash requirements to fund ongoing operations, we have incurred and continue to incur significant professional fees and other costs in connection with preparation and handling of the Bankruptcy cases. WeFor ~~anticipate~~the ~~that~~three wemonths ~~will~~ended ~~continue~~March 31, to2017 ~~incur~~and ~~significant~~2016, ~~professional~~we ~~fees~~paid ~~and~~$10 ~~costs~~million ~~for~~and ~~the~~$13 ~~pendency~~million, ofrespectively, ~~the~~in ~~Bankruptcy~~professional ~~cases~~fees. ~~Pursuant~~We toanticipate ~~the~~that ~~terms of the PSA and the Term Loan Agreement,~~ we ~~are~~will ~~obligated~~continue to ~~pay~~incur ~~the~~significant ~~reasonable~~professional fees and costs offor ~~specified~~the ~~legal~~pendency ~~and financial advisors to each~~ of the ~~creditor~~Bankruptcy ~~parties to the PSA and the Term Loan agent~~cases.

44For additional discussion, see Part I, Item 1A, “Risk Factors - Risk Factors Related to Our Restructuring” in our Annual Report on Form 10-K for the year ended December 31, 2016.

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For additional discussion, see Part I, Item 1A, “Risk Factors - Risk Factors Related to Our Restructuring” in our Annual Report on Form 10-K for the year ended December 31, 2015.

Capital Expenditures

Cash used for capital expenditures, including capitalized interest, totaled $453 million during the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017 and $~~169~~23 million during the ~~nine~~three months ended ~~September~~March 30, 2015. In connection with our capital expenditure program, we have outstanding commitments, including shipyard and purchases commitments of approximately $592 million and $632 million as of September 30, 2016 and December 31, 2015, respectively. Our shipyard and purchase commitments consist of obligations outstanding to external vendors primarily related to future capital purchases and the construction of the Three High-Spec Jackups Under Construction by SWS in China. Our outstanding shipyard commitments include $579 million, of which $192 million is due in 2016 ~~for the Prospector 7 and $387 million is due in 2017 for the Prospector 6 and the Prospector 8~~. In April 2016, we agreed with SWS to an extension of the delivery of the Prospector 6, Prospector 7 and Prospector 8 to the second quarter of 2017, the fourth quarter of 2016 and the fourth quarter of 2017, respectively. We are currently in discussions with SWS to further extend each of these delivery dates and have agreed in principle regarding these extensions, but such extensions remain subject to documentation. Each newbuild has been built pursuant to a contract between one of these subsidiaries and SWS, without our parent company guarantee or other direct recourse to any of our subsidiaries other than the applicable subsidiary.

In the future, we expect to continue making investments in capital expenditures. Subject to our liquidity limitations, we plan investments in 2017 to be primarily for expenditures to extend the useful lives of our rigs.

Factors that could cause actual capital expenditures to materially exceed plan include delays and cost overruns in shipyards (including costs attributable to labor shortages), shortages of equipment, latent damage or deterioration to hull, equipment and machinery in excess of engineering estimates and assumptions, changes in governmental regulations and requirements and changes in design criteria or specifications during repair or construction.

~~Future~~We ~~Capital~~currently ~~Expenditures~~have purchase commitments due from certain of our Non-Filing entities to SWS for the construction of three high specification jackups in China. These units are technically complete, however, we have reached agreements with SWS to defer delivery of these units until October 2017 as there are no opportunities to secure acceptable contracts for the assets in the current business environment. Each newbuild has been built pursuant to a contract between one of these Non-Filing entities and SWS, without our parent company guarantee or other direct recourse to any of our other subsidiaries other than the applicable non-filing entity. For us to take delivery of these assets, we would require an acceptable contract to justify the purchase price and suitable financing. We cannot guarantee that we will accept delivery of any of these jackups. In 2017 and 2016, we did not make any payments on the commitments related to the three high specification jackups and in the current business environment, we believe we are unlikely to acquire these drilling rigs. Restrictions under the Consensual Plan may also further constrain our ability to acquire drilling rigs.

As discussed above, we have made, and expect to continue to make, investments in capital expenditures. Subject to our liquidity limitations, we expect remaining investments in 2016 to be primarily for expenditures to extend the useful life of our rigs.

Dividends

In February 2015, we announced that we were suspending the declaration and payment of dividends for the foreseeable future in order to preserve liquidity.

The declaration and payment of dividends ~~require~~requires authorization of our ~~board~~Board of ~~directors~~Directors, provided that such dividends on issued share capital may be paid only out of ~~Paragon~~our ~~Offshore plc’s~~ “distributable reserves” on ~~its~~our statutory balance sheet. Paragon Offshore plc is not permitted to pay dividends out of share capital, which includes share premiums. We had no distributable reserves as of ~~September~~March 3031, ~~2016~~2017 and December 31, ~~2015~~2016. Any determination to declare a dividend, as well as the amount of any dividend that may be declared, will be based on our board ~~of directors~~’s consideration of our financial position, earnings, outlook, capital spending plans, outlook on current and future market conditions and business needs and other factors that our board of directors considers relevant factors at that time. As proposed by the Consensual Plan, we will not be paying any dividends following our emergence from bankruptcy, until and if authorized by the Board of Directors of reorganized Paragon.

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements as that term is defined in Item 303(a)(4)(ii) of Regulation S-K.

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COMMITMENTS AND CONTRACTUAL OBLIGATIONS

For additional information about our commitments and contractual obligations as of December 31, ~~2015~~2016, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations, Commitments and Contractual Obligations” in our Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016.

InWe ~~April~~have ~~2016~~outstanding commitments, weincluding ~~agreed~~shipyard ~~with~~and ~~SWS~~purchase tocommitments anof ~~extension~~approximately of$582 ~~the~~million ~~delivery~~at ofMarch 31, ~~the~~2017. Our ~~Prospector~~purchase 6,commitments ~~Prospector~~consist 7,of ~~and~~obligations ~~Prospector~~outstanding 8to external vendors primarily related to ~~the~~future ~~second~~capital ~~quarter~~purchases ofand ~~2017,~~$579 ~~the~~million ~~fourth~~due ~~quarter~~from certain of ~~2016~~our ~~and~~Non-Filing ~~the~~entities ~~second~~to ~~quarter~~SWS for the construction of ~~2017,~~three ~~respectively~~high specification jackups in China. ~~Our~~These ~~outstanding~~units ~~capital~~are ~~commitments~~technically ofcomplete, ~~$579 million~~however, ofwe ~~which~~have ~~$192~~reached ~~million~~agreements iswith ~~due~~SWS into ~~2016~~defer ~~for~~delivery ~~the~~of ~~Prospector~~these 7units ~~and~~until ~~$387~~October ~~million~~2017 isas ~~due~~there inare ~~2017~~no opportunities to secure acceptable contracts for the ~~Prospector~~assets 6in ~~and~~the ~~Prospector~~current 8business environment. WeEach ~~are~~newbuild ~~currently~~has inbeen ~~discussions~~built ~~with~~pursuant ~~SWS~~ to ~~further~~a ~~extend~~contract ~~each~~between one of these ~~delivery~~Non-Filing ~~dates~~entities and ~~have~~SWS, ~~agreed~~without inour ~~principle~~parent ~~regarding~~company ~~these~~guarantee ~~extensions,~~or ~~but~~other ~~such~~direct ~~extensions~~recourse ~~remain~~to ~~subject~~any toof ~~documentation~~our other subsidiaries other than the applicable non-filing entity. ~~See~~For ~~Note~~us 7to take delivery of these assets, ~~“Debt”~~we ~~for~~would ~~our~~require ~~capital~~an ~~lease~~acceptable ~~obligations~~contract ~~resulting~~to ~~from~~justify the ~~Sale-Leaseback~~purchase ~~Transaction~~price and ~~minimum~~suitable ~~rent~~financing. In 2017 and 2016, we did not make any payments on the commitments related to the three high specification jackups.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Reorganization Accounting

In connection with filing chapter 11 of the Bankruptcy Code on February 14, 2016, the Company is subject to the requirements of ~~FASB~~ ASC 852~~, Reorganizations (“ASC 852”)~~. ~~ASC~~ASC852 ~~852~~ is applicable to companies under bankruptcy protection and requires amendments to the presentation of key financial statement line items. ASC 852 generally does not change the manner in which financial statements are prepared. However, it does require that the financial statements for periods subsequent to the filing of the Bankruptcy cases distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business.

Revenues, expenses, realized gains and losses, and provisions for losses that can be directly associated with the reorganization of the business must be reported separately as reorganization items in the consolidated statements of operations for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2016~~2017. The balance sheet must distinguish pre-petition liabilities subject to compromise from both those pre-petition liabilities that are not subject to compromise and from post-petition liabilities. Liabilities subject to compromise are pre-petition obligations that ~~may~~are benot ~~affected~~fully secured and that have at least a possibility of not being repaid at the full claim amount by the plan of reorganization. Liabilities subject to compromise must be reported at the amounts expected to be allowed by the Bankruptcy Court, even if they may be settled for lesser amounts as a result of the plan of reorganization. See Note 9 - “Reorganization Items” for cash paid for reorganization items in the consolidated statements of cash flows.

As required by ASC 852 we intend to adopt fresh start accounting upon emergence from chapter 11 of the Bankruptcy Code.

Revenue Recognition

Our typical dayrate drilling contracts require our performance of a variety of services for a specified period of time. We determine progress towards completion of the contract by measuring efforts expended and the cost of services required to perform under a drilling contract, as the basis for our revenue recognition. Revenues generated from our dayrate basis drilling contracts and labor contracts are recognized on a per day basis as services are performed and begin upon the contract commencement, as defined under the specified drilling or labor contract. Dayrate revenues are typically earned, and contract drilling expenses are typically incurred ratably over the term of our drilling contracts. We review and monitor our performance under our drilling contracts to confirm the basis for our revenue recognition. Revenues from bonuses are recognized when earned.

We record reimbursements from customers for “out-of-pocket” expenses as revenues and the related direct cost as operating expenses.

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Restricted Cash

Allowance for Doubtful Accounts

Our allowance for doubtful accounts was $3426 million and $4425 million as of ~~September~~March 3031, ~~2016~~2017 and December 31, ~~2015~~2016, respectively. We had no$0.2 ~~recoveries~~million ~~for~~bad ~~the~~debt ~~three~~expense ~~months ended September 30, 2016,~~ and $6no ~~million of~~ recoveries for the ~~nine~~three months ended ~~September~~March 3031, ~~2016~~2017. We ~~compared~~had tono bad debt expense ofor ~~$12~~recoveries ~~million and $27 million~~ for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2015, respectively~~2016. Bad debt expense and recoveries are reported as a component of “Contract drilling services operating costs and expenses” in our Condensed Consolidated Statements of Operations.

Long-lived Assets and Impairments

The estimated useful lives of our property and equipment are as follows:



	Years
Drilling rigs	7 - 30
Drilling machinery and equipment	3 - 5
Other	3 - 10

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We evaluate the impairment of long-lived assets, including specifically identifiable intangibles and property and equipment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For assets classified as held and used, we determine recoverability by evaluating the estimated undiscounted future net cash flows based on projected dayrates and utilization. For property and equipment whose carrying values are determined not to be recoverable, we calculate an impairment loss as a difference between the fair value and carrying amount. We estimate the fair values by applying either an income approach, using projected discounted cash flows, or a market approach. For discussion related to our impairment analysis see Note 4 - “Property and Equipment and Other Assets.”

NEW ACCOUNTING PRONOUNCEMENTS

See Part 1, Note 2 -“New Accounting Pronouncements” for our new accounting pronouncements.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes “forward-looking statements”. All statements other than statements of historical facts included in this report are forward-looking statements, including statements regarding contract backlog, fleet status, our financial position, our ability to implement a plan of reorganization, the Bankruptcy cases, business strategy, taxes, timing or results of acquisitions or dispositions, repayment of debt, borrowings under our credit facilities or other instruments, future capital expenditures, contract commitments, dayrates, contract commencements, extension or renewals, contract tenders, the outcome of any dispute, litigation, audit or investigation, plans and objectives of management for future operations, foreign currency requirements, indemnity and other contract claims, construction and upgrade of rigs, industry conditions, access to financing, impact of competition, governmental regulations and permitting, availability of labor, worldwide economic conditions, taxes and tax rates, indebtedness covenant compliance, dividends and distributable reserves, and timing for compliance with any new regulations. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “should” and similar expressions are intended to be among the statements that identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot assure you that such expectations will prove to be correct. These forward-looking statements speak only as of the date of this report on Form 10-Q and we undertake no obligation to revise or update any forward-looking statement for any reason, except as required by law. These factors include those referenced or described in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2016, this Quarterly Report on Form 10-Q and in our other filings with the SEC. Such risks and uncertainties are beyond our control, and in many cases, we cannot predict the risks and uncertainties that could cause our actual results to differ materially from those indicated by the forward-looking statements. You should consider these risks and uncertainties when you are evaluating us.

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Forward-Looking Statements

This Quarterly Report on Form 10-Q includes “forward-looking statements”. All statements other than statements of historical facts included in this report are forward-looking statements, including statements regarding contract backlog, fleet status, our financial position, our ability to implement a plan of reorganization, the Bankruptcy cases, business strategy, taxes, timing or results of acquisitions or dispositions, repayment of debt, borrowings under our credit facilities or other instruments, future capital expenditures, contract commitments, dayrates, contract commencements, extension or renewals, contract tenders, the outcome of any dispute, litigation, audit or investigation, plans and objectives of management for future operations, foreign currency requirements, indemnity and other contract claims, construction and upgrade of rigs, industry conditions, access to financing, impact of competition, governmental regulations and permitting, availability of labor, worldwide economic conditions, taxes and tax rates, indebtedness covenant compliance, dividends and distributable reserves, and timing for compliance with any new regulations. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “should” and similar expressions are intended to be among the statements that identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot assure you that such expectations will prove to be correct. These forward-looking statements speak only as of the date of this report on Form 10-Q and we undertake no obligation to revise or update any forward-looking statement for any reason, except as required by law. These factors include those referenced or described in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2015, this Quarterly Report on Form 10-Q and in our other filings with the SEC. Such risks and uncertainties are beyond our control, and in many cases, we cannot predict the risks and uncertainties that could cause our actual results to differ materially from those indicated by the forward-looking statements. You should consider these risks and uncertainties when you are evaluating us.

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ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the potential for loss from a change in the value of a financial instrument as a result of fluctuations in interest rates or currency exchange rates, as further described below.

Interest Rate Risk

For variable rate debt, interest rate changes generally do not affect the fair market value of such debt, but do impact future earnings and cash flows, assuming other factors are held constant. We are subject to market risk exposure related to changes in interest rates on borrowings under our Revolving Credit Facility and Term Loan Facility. While the balance of our Revolving Credit Facility and unamortized deferred debt issuance costs are classified as liabilities subject to compromise, we continue to pay interest on the Revolving Credit Facility in the ordinary course of business based on Bankruptcy Court approval. Paragon also continues to make interest payments on its Term Loan Facility in the ordinary course of business.

Interest on borrowings under our Revolving Credit Facility is at an agreed upon applicable margin over adjusted LIBOR, or base rate plus such applicable margin as stated in the agreement. As of ~~September~~March 3031, ~~2016~~2017, we had $709 million borrowings outstanding under our Revolving Credit Facility. A 1% change in the interest rate on the floating rate debt would impact our annual earnings and cash flows by approximately $7 million.

Interest on borrowings under our Term Loan Facility is at an agreed upon percentage point spread over adjusted LIBOR (subject to a 1% floor), or base rate as stated in the agreement. As of ~~September~~March 3031, ~~2016~~2017, we had $635 million in borrowings outstanding under our Term Loan Facility, net of unamortized discount. Since we are currently subject to the 1% LIBOR floor, our Term Loan Facility effectively bears interest at a fixed interest rate. The fair value of our Term Loan Facility was approximately $~~152~~251 million as of ~~September~~March 3031, ~~2016~~2017. Related interest expense for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2016~~2017 was approximately $9 million ~~and $24 million, respectively~~. Holding other variables constant (such as debt levels), a 1% increase in interest rates would increase our annual interest expense by approximately $6 million.

Our Senior Notes bear interest at a fixed interest rate and fair value will fluctuate based on changes in prevailing market interest rates and market perceptions of our credit risk. The fair value of our Senior Notes was approximately $~~278~~182 million as of ~~September~~March 3031, ~~2016~~2017, compared to the carrying value of $984 million.

Foreign Currency Risk

Although we are a U.K. company, we define foreign currency as any non-U.S. denominated currency. Our functional currency is primarily the U.S. dollar. However, outside the United States, a portion of our expenses are incurred in local currencies~~, including Brazilian real, euro, and pound sterling~~. Therefore, when the U.S. dollar weakens (strengthens) in relation to the currencies of the countries in which we operate, our expenses reported in U.S. dollars will increase (decrease).

The majority of our service contracts are denominated in U.S. dollars, but occasionally all or a portion of a contract is payable in local currency. To the extent there is a local currency component in a contract, we attempt to match revenue in the local currency to the operating costs paid in the local currency such as local labor, shore base expenses, and local taxes, if any, in order to minimize foreign currency fluctuation impact. We are exposed to risks on future cash flows to the extent that local currency expenses exceed revenues denominated in local currencies that are other than the U.S. dollar. To help manage this potential risk, we may periodically enter into derivative instruments to manage our exposure to fluctuations in foreign currency exchange rates, and we may conduct hedging activities in future periods to mitigate such exposure., ~~These~~subject ~~contracts~~to ~~are~~certain ~~primarily~~limitations ~~accounted for~~ as ~~cash~~a ~~flow~~result ~~hedges, with the effective portion~~ of ~~changes in~~ the ~~fair~~bankruptcy ~~value of the hedge recorded on the Consolidated Balance Sheet in AOCL~~proceedings. Amounts recorded in AOCL are reclassified into earnings in the same period or periods that the hedged item is recognized in earnings. The ineffective portion of changes in the fair value of the hedged item is recorded directly to earnings. We ~~have documented policies and procedures to monitor and control the use of derivative instruments. We~~ do not engage in derivative transactions for speculative or trading purposes, nor are we a party to leveraged derivatives. At March 31, 2017, we had no outstanding derivative contracts.

Our North Sea and Brazil operations have a significant amount of their cash operating expenses payable in local currencies. To limit the potential risk of currency fluctuations, we may periodically enter into forward contracts, all of which would have a maturity of less than 12 months and would settle monthly in the operations’ respective local currencies. At September 30, 2016, we had no outstanding derivative contracts. Depending on market conditions, we may elect to utilize short-term forward currency contracts in the future.47

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ITEM 4.	CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

~~Randall~~Dean DE. ~~Stilley~~Taylor, Interim President, Chief Executive Officer, and Director of Paragon, and ~~Steven~~Lee AM. ~~Manz~~Ahlstrom, Senior Vice President and Interim Chief Financial Officer of Paragon, with the participation of our management, have evaluated the effectiveness of the disclosure controls and procedures of Paragon as of the end of the period covered by this report. Based on their evaluation as of March 31, 2017, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) were effective at the reasonable assurance level. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in reports that we file under the Exchange Act is ~~accumulated~~recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and is communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. We ~~and~~believe isthat ~~recorded,~~a ~~processed~~controls system, ~~summarized~~no ~~and~~matter ~~reported~~how ~~within~~well ~~the~~designed ~~time~~and ~~periods~~operated, ~~specified~~cannot inprovide ~~the~~absolute ~~rules~~assurance ~~and~~that ~~forms~~the objectives of the ~~SEC.~~control ~~Based~~system onare ~~their evaluation as of September 30~~met, ~~2016,~~and ~~our~~no ~~Chief~~evaluation ~~Executive~~of ~~Officer~~controls ~~and~~can ~~Chief~~provide ~~Financial~~absolute ~~Officer~~assurance ~~have concluded~~ that ~~the~~all ~~Company’s~~control ~~“disclosure~~issues ~~controls~~ and ~~procedures”~~instances ~~(as defined in Rules 13a-15(e) and 15d-15(e)~~ of ~~the~~fraud, ~~Exchange~~if ~~Act)~~any, ~~were~~within ~~effective~~a atcompany ~~the~~have ~~reasonable~~been ~~assurance level~~detected.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~September~~March 3031, ~~2016~~2017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.	OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

Information regarding legal proceedings is set forth in Note 1 - “Organization, ~~Basis~~Currents ofEvents, ~~Presentation~~ and ~~Current~~Basis ~~Events~~of Presentation” and Note 1617, “Commitments and Contingencies” to our unaudited consolidated financial statements included in Item I, Part I of this Quarterly Report on Form 10-Q and is incorporated herein by reference.

As of ~~September~~March 3031, ~~2016~~2017, we were involved in a number of lawsuits and matters which have arisen in the ordinary course of business for which we do not expect the liability, if any, to have a material adverse effect on our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows. We cannot predict with certainty the outcome or effect of pending or threatened litigation or legal proceedings. There can be no assurance that our beliefs or expectations as to the outcome or effect of any lawsuit or other matters will prove correct and the eventual outcome could materially differ from management’s current estimates.

On August 23, 2016, we received notice from the Brazilian Institute of Environment and Renewable Natural Resources (“IBAMA”) regarding an infraction that occurred on a Noble vessel operated by our subsidiary prior to the Spin -Off. The infraction related to an incident onboard the Noble Dave Beard in May 2011 regarding the discharge of oil into the sea and the subsequent communication to IBAMA regarding such discharge. We filed an administrative defense to the infraction on September 12, 2016. As the incident related to a Noble vessel prior to the Spin -Off, we intend to seek indemnification from Noble with respect to any fines assessed by IBAMA regarding this incident pursuant to the Brazil TSA.


ITEM 1A.	RISK FACTORS

~~Except~~There ~~as set forth below, there~~ have been no material changes to the risk factors previously disclosed in our our Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016. For additional information about our risk factors see the risks described in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016.

Risks relating to the Bankruptcy Court’s denial of confirmation of the Amended Plan

As a result of the Bankruptcy Court’s denial of confirmation of the Amended Plan, there is a risk as to our ability to develop an alternative plan of reorganization, obtain requisite creditor approval of such alternative plan and obtain confirmation of such alternative plan by the Bankruptcy Court. If we are unable to do so, we may have to liquidate the Company. Additionally, if we are unable to confirm an alternative plan that is substantially similar to the Amended Plan, the Noble Settlement will not become effective unless Noble consents to modify or waive such conditions.

Trading in our securities during the pendency of our bankruptcy proceedings is extremely speculative and poses substantial risks. Since the Bankruptcy Court denied the confirmation of our Amended Plan, there is a possibility that under a new plan of reorganization, all of our existing common shares could be cancelled without consideration, and therefore no longer tradeable, and holders of such common shares would not be entitled to receive any distributions, interest or other property for their common shares.

Trading in securities of an issuer during pendency of bankruptcy proceedings is extremely speculative and there is significant risk that investors will lose their entire investment. We have not developed an alternative plan of reorganization after the Bankruptcy Court denied confirmation of our Amended Plan. An alternative plan of reorganization may include the cancellation of all of our existing common shares without consideration. The holders of our common shares would not be entitled to receive any distributions, interest or other property, rendering such common shares worthless. We cannot estimate how much time would pass before we can file an alternative plan of reorganization. We cannot estimate how such an alternative plan could affect the Company and its security holders. As a result, there is substantial risk that holders of our existing common shares would recover nothing for their investment. We caution and urge existing and future investors to carefully consider these and other risks with respect to investments in our common shares and other securities or claims.

The February 14, 2016 filing for bankruptcy by Paragon Offshore plc constituted an event of default under our Lease Agreements for the Prospector 1 and Prospector 5.

The commencement of proceedings under chapter 11 of the Bankruptcy Code by Paragon Offshore plc constituted an event of default under the Lease Agreements for the Prospector 1 and the Prospector 5. If the Lessors do not continue to forbear taking action or grant us a waiver with respect to this event of default, we will be in default under both the Lease Agreement for the Prospector 1 and the Lease Agreement for the Prospector 5 and would have to consider commencing a Chapter 11 proceeding for the applicable Prospector entity. As a result, all rent amounts outstanding under the Lease Agreements (the “Outstanding Lease Balances”) will become immediately due and payable. In addition to the Outstanding Lease Balances, the following will also become due and payable: (i) a fee representing 3% of the Outstanding Lease Balances and (ii) any broken funding costs

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incurred by the Lessors (together with the Outstanding Lease Balances, the “Termination Fee”). If we are unable to pay the Termination Fee within three (3) calendar months of becoming due, the Lessors will have the right to sell the Prospector Rigs through a transparent sale process.

We may have significant financial commitments with respect to three newbuild high specification jackup rigs under construction.

In connection with our acquisition of Prospector, we acquired subsidiaries that contracted for the construction of three newbuild high specification jackup rigs by Shanghai Waigaoqiao Ship Co. Ltd. (“SWS”) in China. At September 30, 2016, we had purchase commitments of $579 million, of which $192 million is due in 2016 and $387 million is due in 2017, on the construction of three high-specification jackup rigs related to the Prospector Acquisition, the Prospector 6, Prospector 7 and Prospector 8, or collectively the “Three High-Spec Jackups Under Construction”. The delivery of these newbuild rigs has been rescheduled to the second quarter of 2017, the fourth quarter of 2016 and the fourth quarter of 2017, respectively.

Each of these rigs is being built pursuant to a contract between a subsidiary of Prospector and the shipyard, without a Paragon parent company guarantee or other direct recourse to any other subsidiary of Paragon other than the applicable subsidiary. In the event we are unable to extend delivery of any of the Three High-Spec Jackups Under Construction, we will lose ownership of the applicable rig, at which time, the associated costs (primarily representing down-payments on these rigs) will be forfeited. These subsidiaries have currently pre-paid to SWS 1%, 7% and 7%, respectively, of the purchase price for each newbuild pursuant to the contracts with SWS. Upon delivery, these subsidiaries will be required to pay the remaining purchase price in full for the newbuild being delivered, or $195 million, $192 million and $192 million, respectively.

Taking delivery of the newbuilds will require each of these subsidiaries to secure additional capital to finance the remaining purchase price, which they may not be able to obtain at all or on commercially acceptable terms. Such financing may be increasingly difficult to secure during the pendency of the Bankruptcy cases. Any financing may also be contingent upon securing a drilling contract for such newbuild. Should one of these subsidiaries ultimately not accept delivery for a newbuild for any reason, they will forfeit any pre-paid portion of the purchase price to SWS, including any amounts paid in connection with any extensions of delivery. In addition, SWS could pursue a contractual claim against our subsidiary holding the applicable newbuild contract for the remaining purchase price of such newbuild. While SWS has no contractual recourse to any of our subsidiaries other than these subsidiaries holding the SWS contracts, if a court of competent jurisdiction finds that one or more of our other subsidiaries who are not party to such contracts are liable to SWS, it could have a material adverse effect on our business, financial condition and results of operations.

If we are unable obtain a contract for the Prospector 1 on or before March 17, 2017, we will create an event of default under both of the Lease Agreements.

On September 12, 2016, the current contract for the Prospector 1 concluded. Under the Lease Agreement, we have 180 days, or until March 17, 2017, to obtain a new contract for the Prospector 1 unless we are able to obtain a waiver from the Lessors. If we are unsuccessful in obtaining a new contract or a waiver from the Lessors, we will be in default under both the Lease Agreement for the Prospector 1 and the Lease Agreement for the Prospector 5. As a result, the outstanding lease balances will become immediately due and payable. In addition to the Outstanding Lease Balances, the following will also become due and payable: (i) a fee representing 3% of the Outstanding Lease Balances and (ii) any broken funding costs incurred by the Lessors (together with the Outstanding Lease Balances, the “Termination Fee”). If we are unable to pay the Termination Fee within three (3) calendar months of becoming due, the Lessors will have the right to sell the Prospector Rigs through a transparent sale process.


ITEM 6.	EXHIBITS

The information required by this Item 6 is set forth in the Index to Exhibits accompanying this Quarterly Report on Form 10-Q and is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Paragon Offshore plc, a company registered under the laws of England and Wales

/s/ Randall D. Stilley		November 9, 2016
/s/ Dean E. Taylor		May 10, 2017
Randall D. Stilley		Date
Dean E. Taylor		Date
President, Chief Executive Officer and Director
Interim President, Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Steven A. Manz		November 9, 2016
/s/ Lee M. Ahlstrom		May 10, 2017
Steven A. Manz		Date
Lee M. Ahlstrom		Date
Senior Vice President and Chief Financial Officer
Senior Vice President and Interim Chief Financial Officer
(Principal Financial Officer)
/s/ Alejandra Veltmann		~~November~~May 910, ~~2016~~2017
Alejandra Veltmann		Date
Vice President and Chief Accounting Officer
(Principal Accounting Officer)

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Index to Exhibits

Number		Description
2.1		Master Separation Agreement, dated as of July 31, 2014, between Noble Corporation and Paragon Offshore plc (incorporated by reference to Exhibit 2.1 to Paragon Offshore plc’s Current Report on Form 8-K filed on August 5, 2014).
3.1		Articles of Association of Paragon Offshore plc (incorporated by reference to Exhibit 3.1 to Paragon Offshore plc’s Quarterly Report on Form 10-Q filed on August 29, 2014).
4.1		Senior Secured Revolving Credit Agreement dated as of June 17, 2014 among Paragon Offshore Limited, Paragon International Finance Company, the Lenders from time to time parties thereto; JPMorgan Chase Bank, N.A., as Administrative Agent, Swingline Lender and an Issuing Bank; Deutsche Bank Securities Inc. and Barclays Bank PLC, as Syndication Agents; and J.P. Morgan Securities LLC, Deutsche Bank Securities Inc. and Barclays Bank PLC, as Joint Lead Arrangers and Joint Lead Bookrunners (incorporated by reference to Exhibit 4.1 to Paragon Offshore Limited’s Registration Statement on Form 10 filed on July 3, 2014).
4.2		Indenture, dated as of July 18, 2014, by and among Paragon Offshore plc, the guarantors listed therein, Deutsche Bank Trust Company Americas, as trustee, and Deutsche Bank Luxembourg S.A., as paying agent and transfer agent (incorporated by reference to Exhibit 4.1 to Paragon Offshore plc’s Current Report on Form 8-K filed on July 22, 2014).
4.3		Senior Secured Term Loan Credit Agreement, dated as of July 18, 2014, by and among Paragon Offshore plc, as parent guarantor, Paragon Offshore Finance Company, as borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 4.2 to Paragon Offshore plc’s Current Report on Form 8-K filed on July 22, 2014).
10.1		Tax Sharing Agreement, dated as of July 31, 2014, between Noble Corporation plc and Paragon Offshore plc (incorporated by reference to Exhibit 10.1 to Paragon Offshore plc’s Current Report on Form 8-K filed on August 5, 2014).
10.2		Employee Matters Agreement, dated as of July 31, 2014, between Noble Corporation and Paragon Offshore plc (incorporated by reference to Exhibit 10.2 to Paragon Offshore plc’s Current Report on Form 8-K filed on August 5, 2014).
10.3		Transition Services Agreement, dated as of July 31, 2014, between Noble Corporation and Paragon Offshore plc (incorporated by reference to Exhibit 10.3 to Paragon Offshore plc’s Current Report on Form 8-K filed on August 5, 2014).
10.4		Transition Services Agreement (Brazil), dated as of July 31, 2014, among Paragon Offshore do Brasil Limitada, Paragon Offshore (Nederland) B.V., Paragon Offshore plc, Noble Corporation, Noble Dave Beard Limited and Noble Drilling (Nederland) II B.V. (incorporated by reference to Exhibit 10.4 to Paragon Offshore plc’s Current Report on Form 8-K filed on August 5, 2014).
10.5†		Paragon Offshore plc 2014 Employee Omnibus Incentive Plan (incorporated by reference to Exhibit 10.5 to Paragon Offshore plc’s Current Report on Form 8-K filed on August 5, 2014).
10.6†		Paragon Offshore plc 2014 Director Omnibus Plan (incorporated by reference to Exhibit 10.6 to Paragon Offshore plc’s Current Report on Form 8-K filed on August 5, 2014).
10.7†		Paragon Grandfathered 401(k) Savings Restoration Plan (incorporated by reference to Exhibit 10.7 to Paragon Offshore plc’s Current Report on Form 8-K filed on August 5, 2014).
10.8†		Paragon 401(k) Savings Restoration Plan (incorporated by reference to Exhibit 10.8 to Paragon Offshore plc’s Current Report on Form 8-K filed on August 5, 2014).
10.9†		Form of Deeds of Indemnity between Paragon Offshore plc and certain directors and officers (incorporated by reference to Exhibit 10.9 to Paragon Offshore plc’s Current Report on Form 8-K filed on August 5, 2014).
10.10†		Paragon Offshore Services LLC 2014 Short-Term Incentive Program (incorporated by reference to Exhibit 10.1 to Paragon Offshore plc’s Current Report on Form 8-K filed on August 18, 2014).
10.11†		Form of Change of Control Agreement between Paragon Offshore plc and certain officers thereof (incorporated by reference to Exhibit 10.2 to Paragon Offshore plc’s Current Report on Form 8-K filed on August 18, 2014).
10.12†		Form of Performance Vested Restricted Stock Unit Replacement Award Agreement (incorporated by reference to Exhibit 10.12 to Paragon Offshore plc’s Quarterly Report on Form 10-Q filed on August 29, 2014).
10.13†		Form of Time Vested Restricted Stock Unit Replacement Award Agreement (incorporated by reference to Exhibit 10.13 to Paragon Offshore plc’s Quarterly Report on Form 10-Q filed on August 29, 2014).
10.14†		Form of Employee Time Vested Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.14 to Paragon Offshore plc’s Quarterly Report on Form 10-Q filed on August 29, 2014).
10.15†		Form of Director Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.15 to Paragon Offshore plc’s Quarterly Report on Form 10-Q filed on August 29, 2014).
10.16		Form of Share Purchase Agreement, dated November 17, 2014, between Paragon Offshore plc and each seller party thereto (incorporated by reference to Exhibit 10.1 to Paragon Offshore plc’s Current Report on Form 8-K filed on November 19, 2014).
10.17†		Paragon Offshore Executive Bonus Plan, dated February 19, 2015 (incorporated by reference to Exhibit 10.1 to Paragon Offshore plc’s Current Report on Form 8-K filed on February 25, 2015).
10.18†		Form of Time Vested Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.2 to Paragon Offshore plc’s Current Report on Form 8-K filed on February 25, 2015).
10.19†		Form of Performance Vested Restricted Stock Unit Award Agreement (incorporated by reference to Exhibit 10.3 to Paragon Offshore plc’s Current Report on Form 8-K filed on February 25, 2015).
10.20†		Paragon Offshore plc 2014 Employee Omnibus Incentive Plan (Amended and Restated) (Filed as Annex A to Paragon Offshore plc’s Definitive Proxy Statement on Schedule 14A filed with the Commission on March 20, 2015).
10.21†		Paragon Offshore plc 2014 Director Omnibus Plan (Amended and Restated) (Filed as Annex B to Paragon Offshore plc’s Definitive Proxy Statement on Schedule 14A filed with the Commission on March 20, 2015).
10.22		Lease Agreement in Respect of Prospector 1 dated June 3, 2015, by and between Prospector One Corporation, as Lessor, and Prospector Rig 1 Contracting Company S.à r.l., as Lessee (incorporated by reference to Exhibit 10.1 to Paragon Offshore plc’s Current Report on Form 8-K filed on June 5, 2015).
10.23		Lease Agreement in Respect of Prospector 5 dated June 3, 2015, by and between Prospector Five Corporation, as Lessor, and Prospector Rig 5 Contracting Company S.à r.l., as Lessee (incorporated by reference to Exhibit 10.2 to Paragon Offshore plc’s Current Report on Form 8-K filed on June 5, 2015).
10.24†		Form of Key Employee Retention Plan Agreement (incorporated by reference to Exhibit 10.1 to Paragon Offshore plc’s Current Report on Form 8-K filed on October 30, 2015).
10.25		Term Sheet Regarding Noble Settlement, dated February 11, 2016 (incorporated by reference to Exhibit 99.2 to Paragon Offshore plc’s Current Report on Form 8-K filed on February 12, 2016).
10.26		Plan Support Agreement, dated February 12, 2016 (incorporated by reference to Exhibit 99.2 to Paragon Offshore plc’s Current Report on Form 8-K filed on February 16, 2016).
10.27		Noble Settlement Agreement, dated April 29, 2016 (incorporated by reference to Exhibit 10.1 to Paragon Offshore plc’s Current Report on Form 8-K filed on May 6, 2016).
10.27†		Employment Letter, dated as of November 9, 2016, by and between Dean Taylor and Paragon Offshore Services LLC (incorporated by reference to Exhibit 10.1 to Paragon Offshore plc’s Current Report on Form 8-K filed on November 15, 2016).
10.28†		2016 Paragon Offshore plc Short-Term Incentive Plan
10.28		Noble Settlement Agreement, dated April 29, 2016 (incorporated by reference to Exhibit 10.1 to Paragon Offshore plc’s Current Report on Form 8-K filed on May 6, 2016).
10.29		Amendment to Plan Support Agreement, dated August 5, 2016 (incorporated by reference to Exhibit 10.1 to Paragon Offshore plc’s Current Report on Form 8-K filed on August 8, 2016).
10.29†		2016 Paragon Offshore plc Short-Term Incentive Plan (incorporated by reference to Exhibit 10.28 to Paragon Offshore plc’s Quarterly Report on Form 10-Q filed on August 9, 2016).
10.30		~~Term Sheet Regarding~~ Amendment to ~~Noble~~Plan ~~Settlement~~Support Agreement, dated August 5, 2016 (incorporated by reference to Exhibit 10.21 to Paragon Offshore plc’s Current Report on Form 8-K filed on August 8, 2016).
10.31		Term Sheet Regarding Amendment to Noble Settlement Agreement, dated August 5, 2016 (incorporated by reference to Exhibit 10.2 to Paragon Offshore plc’s Current Report on Form 8-K filed on August 8, 2016).
10.32†		Separation Agreement and General Release, by and between Steven Manz and Paragon Offshore Services LLC, Paragon Offshore plc and Paragon International Investment Limited, dated November 17, 2016 (incorporated by reference to Exhibit 10.1 to Paragon Offshore plc’s Current Report on Form 8-K filed on November 22, 2016).
10.33†		Separation Agreement and General Release, by and between Randall Stilley and Paragon Offshore Services LLC, Paragon Offshore PLC, Paragon International Investment Limited and their affiliates, dated November 30, 2016. (incorporated by reference to Exhibit 10.1 to Paragon Offshore plc’s Current Report on Form 8-K filed on December 1, 2016).
10.34†		Paragon Offshore Services LLC 2017 Short-Term Incentive Program. (incorporated by reference to Exhibit 10.34 to Paragon Offshore plc’s Annual Report on Form 10-K/A filed on May 1, 2017).
31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*		Interactive Data Files


*	Filed herewith.


**	Furnished herewith.


†	Management contract or compensatory plan or arrangement.

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